MPRWA Regular Meeting Agenda Packet 02-28-13

March 26, 2018 | Author: L. A. Paterson | Category: Mail, Environmental Impact Assessment, Groundwater, Mediation, Water


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AgendaMonterey Peninsula Regional Water Authority (MPRWA) Regular Meeting 7:00 PM, Thursday, February 28, 2013 City Hall East side of Monte Verde Street between Ocean and Seventh Avenues City of Carmel-By-the-Sea, California ROLL CALL PLEDGE OF ALLEGIANCE REPORTS FROM BOARD DIRECTORS AND STAFF PUBLIC COMMENTS PUBLIC COMMENTS allows you, the public, to speak for a maximum of three minutes on any subject which is within the jurisdiction of the MPRWA and which is not on the agenda. Any person or group desiring to bring an item to the attention of the Authority may do so by addressing the Authority during Public Comments or by addressing a letter of explanation to: MPRWA, Attn: Monterey City Clerk, 580 Pacific St, Monterey, CA 93940. The appropriate staff person will contact the sender concerning the details. AGENDA ITEMS 1. Approve Final Agreement to Form the Monterey Peninsula Water Supply Project Governance Committee (Freeman) 2. Receive and Discuss Testimony Submitted to California Public Utilities Commission February 22, 2013 Deadline for Application (A- 12-04-019) Based on the MPRWA Approved Position Statement (Burnett) 3. Discuss Opportunity for Video Transmission Services through Access Monterey Peninsula (Milton) ADJOURNMENT The Monterey Peninsula Regional Water Authority is committed to include the disabled in all of its services, programs and activities. For disabled access, dial 711 to use the California Relay Service (CRS) to speak to staff at the Monterey City Clerk’s Office, the Principal Office of the Authority. CRS offers free text-to-speech, speech-to-speech, and Spanish-language services 24 hours a day, 7 days a week. If you require a hearing amplification device to attend a meeting, dial 711 to use CRS to talk to staff at the Monterey City Clerk’s Office at (831) 646-3935 to coordinate use of a device or for information on an agenda. Agenda related writings or documents provided to the MPRWA are available for public inspection during the meeting or may be requested from the Monterey City Clerk’s Office at 580 Pacific St, Room 6, Monterey, CA 93940. This agenda is posted in compliance with California Government Code Section 54954.2(a) or Section 54956. Monterey Peninsula Regional Water Authority Agenda Report Date: February 28, 2013 Item No: 1. №08/12 SUBJECT: Approve Final Agreement to Form the Monterey Peninsula Water Supply Project Governance Committee (Freeman) DISCUSSION: There is no report for this item. The Draft agreement is attached to this report. ATTACHMENTS: 1) Draft MPWSP Governance Agreement – Red Line Version 2) Draft MPWSP Governance Agreement – Final Proposed Version MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 1, Packet Page 1 Redline – February 21, 2013 – Subject to Revision 1 AGREEMENT TO FORM THE MONTEREY PENINSULA WATER SUPPLY PROJECT GOVERNANCE COMMITTEE This AGREEMENT TO FORM THE MONTEREY PENINSULA WATER SUPPLY PROJECT GOVERNANCE COMMITTEE (“Agreement”) is made and entered into as of February 19__, 2013, by and among the MONTEREY PENINSULA REGIONAL WATER AUTHORITY (“MPRWA”), the MONTEREY PENINSULA WATER MANAGEMENT DISTRICT (“MPWMD”), the COUNTY OF MONTEREY (“County”), and the CALIFORNIA-AMERICAN WATER COMPANY (“Cal-Am”). The MPRWA, the MPWMD, the County, and Cal-Am are sometimes referred to individually herein as a “Party,” and collectively as the “Parties.” I. Formation of Governance Committee Pursuant to the terms of this Agreement, the Parties hereby form the Monterey Peninsula Water Supply Project Governance Committee (“Governance Committee”) comprised of representatives of the MPRWA, the MPWMD, the County, and Cal-Am to ensure efficient and effective public input into the development and operation of the Monterey Peninsula Water Supply Project (“Project”). Cal-Am’s entry into this Agreement is expressly conditioned upon its legal obligations to abide by the orders and decisions of the California Public Utilities Commission (“CPUC”). Therefore, should the CPUC order Cal- Am not to participate in this Agreement, Cal-Am shall be relieved of all obligations set forth in this Agreement and this Agreement may be terminated by Cal -Am upon such CPUC order. Further, if the CPUC issues any order or decision that conflicts with any particular provision of this Agreement, Cal -Am shall be relieved of any and all obligations to abide by the conflicting provision of this Agreement. II. Definitions A. Application A.12-04-019. Application of California-American Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to Recover All Present and Future Costs in Rates, filed with the CPUC on or about April 23, 2012. B. ASR Infrastructure. The facilities used to inject into and extract potable water from the Seaside Groundwater Basin, as described in Application A.12-04-019. These facilities will include the Aquifer Storage and Recovery (“ASR”) wells and related appurtenances, the backflush pipeline, the recirculation pipeline and the ASR pipeline. C. Brine Discharge Infrastructure. Facilities located outside the desalination plant site that are used to dispose of brine into the ocean. These facilities will include the brine disposal pipeline, the brine receiving station, any modification to the MRWPCA existing outfall, or a new outfall, or potentially the use of other existing outfalls with or without modifications. D. Cal-Am Notification. The written notification from Cal-Am to the Chair of the Governance Committee that a matter is ready for consideration, consultation, or action by the Governance Committee as provided herein, and as further defined within Section V.B. E. CEQA. The California Environmental Quality Act. E.F. Contracts. [Cal-Am to suggest edits] One or more of the following contracts between Cal-Am and a selected contractor, valued in excess of $1 million, relating to the design and/or construction of the following facilities: (1) design-build contract(s) for the Desalination Infrastructure, (2) design-build contract(s) for the Source Water Infrastructure, (3) design-build contract(s) for the Brine Discharge Infrastructure contracted for by Cal-Am, (4) design-bid-build contract(s) for the Product Water Pipeline, (5) design-bid-build contract(s) for the Raw Water Pipeline; (6) design-bid-build contract(s) forthe ASR Infrastructure, and (7) design-bid-build contract(s) for the Terminal Reservoir Infrastructure. Contracts for Oone or more of the contracts facilities identified above in this definition may be combined Formatted: Highlight Formatted: No underline Formatted: Bullets and Numbering MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 2, Packet Page 2 Redline – February 21, 2013 – Subject to Revision 2 into a single contract. In addition, the design and construction of a single facility identified above in this definition may be combined into a single contract. F.G. CPCN. The Certificate of Public Convenience and Necessity, if ordered by the CPUC, within Application A.12-04-019. G.H. Desalination Infrastructure. Facilities located within the desalination plant site that are used to create potable water from either an ocean source water, brackish source water or a combination thereof, and appurtenant facilities needed to dispose of brine to the Brine Discharge Infrastructure, dispose of wastewater (i.e. process water and sanitary discharge), and any needed facilities that may be required to return groundwater desalinated water for use withinprevent export of native back to the Salinas River Groundwater Basin waterValley. H.I. Desalination Project. The combination of the Desalination Infrastructure, the Brine Discharge Infrastructure, the Source Water Infrastructure, the Product Water Pipeline, the Raw Water Pipeline, and the Terminal Reservoir Infrastructure. I.J. GWR Project. Groundwater replenishment project to be implemented by MRWPCA and/or MPWMD which involves advanced treatment of wastewater and the injection of product replenishment water into the Seaside Groundwater Basin. This project includes facilities for the treatment, conveyance, and injection of the product replenishment water. J.K. MRWPCA. The Monterey Regional Water Pollution Control Agency. K.L. Product Water Pipeline. Facilities used to convey potable water from the Desalination Infrastructure to the Terminal Reservoir Infrastructure and to Cal-Am’s existing distribution system at the Eardley Pump Station. L.M. Project. The Monterey Peninsula Water Supply Project as proposed in Application A.12-04-019, and as it may be modified by the CPCN issued in response to that Application. M.N. Public Entity Members of the Governance Committee. The MPRWA, the MPWMD, and the County. Cal-Am is not a Public Entity Member of the Governance Committee. N.O. Raw Water Pipeline. Facilities used to convey feedwater (i.e., raw water) from the Source Water Infrastructure to the Desalination Infrastructure. O.P. Source Water Infrastructure. Wells and appurtenant facilities (or alternative contingent intake facilities) that are used to extract and convey feedwater (i.e., raw water) to the Raw Water Pipeline. These facilities will include the slant intake wells and related appurtenances (if permitted) as well as alternate contingent intakes such as a Ranney Well or open ocean intake as submitted by Cal -Am in its contingency plans. P.Q. Terminal Reservoir Infrastructure. Facilities used to pump and store potable water in storage tanks east of the City of Seaside along General Jim Moore Boulevard. These facilities will include the terminal reservoir, terminal reservoir pump station, overflow facilities and related appurtenance needed to assist in the moving of water to and from the ASR Infrastructure, other ASR facilities, and Product Water Pipeline. Q.R. Value Engineer. The professional engineer(s) to be retained by, or to consult with, Cal - Am to perform a value engineering analysis for the Desalination Project to potentially lower the costs of, or maximize the value of, the Desalination Project to Cal-Am’s ratepayers, including matters concerning the cost effectiveness, performance, reliability, quality, safety, durability, effectiveness, or other desirable characteristics of the Desalination Project. MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 3, Packet Page 3 Redline – February 21, 2013 – Subject to Revision 3 The Parties acknowledge that the Project is still under development and several aspects of the Project may be modified as planning continues and as may be ordered by the CPUC. If necessary to address future modifications to the Project, the Parties agree to cooperate in good faith to reach agreement to amend the definitions set forth herein as necessary to fulfill the purpose of this Agreement. III. Membership and Voting Each of the Public Entity Members of the Governance Committee shall be represented on the Governance Committee by one elected official of such entity and one alternate who shall also be an elected official. No individual person may be appointed as the primary or alternate representative of more than one Party. If MPWRAMPRWA ceases to exists, then the cities that are members of the MPRWA at the time of the MPRWA’s termination shall collectively choose a “city representative” that will take the place of the MPRWA representative on the Governance Committee. Cal Am shall be represented by the President of Cal-Am or the President’s alternate, whom the President may designate to act on his or her behalf at anytime. The Governance Committee shall appoint a “Chair” and “Vice-Chair” from the primary (non-alternate) elected officials appointed to the Governance Committee. Each of the Public Entity Members of the Governance Committee shall have a single equal vote in decision-making. Cal-Am shall not have a vote for purposes of the issuance of decisions or recommendations by the Governance Committee. However, Cal-Am shall, unless it abstains from doing so, state its preference with respect to any decision or recommendation made by the Governance Committee (the “Cal-Am Preference”) at the time that any decision or recommendation is made by the Governance Committee and the Cal-Am Preference shall be recorded within the meeting minutes together with a summary of any explanation provided by Cal-Am for the Cal-Am Preference. IV. Powers A. Purpose. The purpose and function of the Governance Committee shall be to: (i) consult with, advise and, in some circumstances, provide direction to, Cal-Am concerning the design, permitting, construction, operations, maintenance, repairs, and replacements of the components of the Desalination Project; and (ii) serve as the entity which Cal-Am regularly updates as to Desalination Project status and issues. The members of the Governance Committee shall diligently consider all matters and cause the Governance Committee to timely and promptly issue decisions or recommendations brought before it as provided pursuant to the terms of this Agreement. B. Waiver of Action. Upon motion and affirmative vote of the Governance Committee (pursuant to Section VII of this Agreement), the Governance Committee may choose to waive its right t o issue a decision or recommendation with respect to any matter for which the Governance Committee is afforded such right herein. The purpose of the Governance Committee’s right to waive its right to make any specified decision or recommendation herein is to empower the Governance Committee to avoid issuing any decision or recommendation, which, in its determination, would violate any law, unreasonably delay efforts to develop water supplies for the Monterey Peninsula, or otherwise compromise the public interest. V. Governance Committee Action; Procedures A. Matters Subject to Governance Committee Action. Matters for consideration, consultation, decision, or recommendation by the Governance Committee shall be divided among three categories, with varying processes for consultation, recommendations, and/or decision-making, as follows: Category A: The Governance Committee makes the decision or recommendation respecting the matter after receipt of a written recommendation from Cal-Am, and upon issuance of its decision or recommendation, the Governance Committee provides a written explanation of the reasons for its decision to Cal-Am within seven (7) calendar days following its decision or recommendation. Thereafter, Cal-Am will comply with the decision or recommendation issued by the Governance Committee so long as the decision or recommendation is consistent with the Formatted: Tab stops: 1", Left + Not at 4.25" MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 4, Packet Page 4 Redline – February 21, 2013 – Subject to Revision 4 terms of this Agreement. However, notwithstanding any provision of this Agreement, for any matter covered by Category A that relates to an action which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, as defined by section 21065 of the California Public Resources Code, no decision or recommendation shall be made by the Governance Committee as to the subject matter unless and until such time as the action has been subject to review by an appropriate agency in accordance with the California Environmental Quality Act (“CEQA”)CEQA. The foregoing provision shall not be construed as an agreement or determination by or among any of the Parties that CEQA applies to any action of the Governance Committee. This Agreement is itself not a “project” as defined by section 15378 of the CEQA Guidelines (California Code of Regulations, Title 14, Chapter 3) because it is an organizational activity that will not result in direct or indirect physical changes in the environment and this Agreement makes no commitment to any project. Category B: The Governance Committee makes a recommendation respecting the matter after receipt of a written recommendation from Cal-Am. However, Cal-Am may determine, at its sole discretion, whether or not to follow the Governance Committee’s recommendation, provided that if Cal-Am chooses not to follow the recommendation, Cal-Am shall provide a written explanation of Cal-Am’s reasons for its decision not to follow the recommendation within ten (10) calendar days following the issuance of the Governance Committee’s recommendation. Further, should Cal-Am choose not to follow the recommendation of the Governance Committee, then any Party may raise the issue for review by the CPUC during Cal-Am’s next general rate case. Category C: Cal-Am makes the decision respecting the matter after receiving a recommendation from the Governance Committee. Cal-Am need not issue a written explanation for its decision, although should Cal-Am choose not to follow the recommendation of the Governance Committee, then any Party may raise the issue for review by the CPUC during Cal - Am’s next general rate case. B. Procedure for Cal-Am Notification. Whenever Cal-Am is presented with, or becomes aware of, a matter that falls within any of the subjects identified herein for consideration, consultation, decision or recommendation by the Governance Committee that is ripe for presentation to the Governance Committee, Cal-Am shall, in writing, promptly notify the Chair of the Governance Committee (“Cal-Am Notification”), who shall schedule the matter for consideration by the Governance Committee. For purposes of this Agreement, a matter shall be deemed ripe for presentation to the Governance Committee at such time as either specified within the matters set forth below, or for any matter for which no specification is provided, Cal-Am shall determine the time(s) at which the matter is appropriate for presentation for consultation, decision, or recommendation by the Governance Committee consistent with the purpose of this Agreement. Unless a different period is specified herein, for all matters for which a decision or recommendation is to be made by the Governance Committee, the Governance Committee shall issue its decision or recommendation within ten (10) calendar days following receipt of the Cal -Am Notification. If the Public Entity Members of the Governance Committee determine that the Governance Committee requires more than the prescribed time period provided for in this Agreement to act on any matter that is the subject of the Cal-Am Notification, the Chair of the Governance Committee may, within seven (7) calendar days following receipt of the Cal-Am Notification, request a reasonable extension of time by written request to Cal-Am, and Cal-Am and the Public Entity Members of the Governance Committee shall cooperate in good faith to agree upon and set a reasonable alternative deadline for action on the subject matter to the extent that such an extension would not unreasonably delay the Project, not unreasonabley delay required CPUC filings by Cal-Am, or otherwise compromise the public interest. So as to avoid undue delay, if the Governance Committee fails to make any decision or provide any recommendation upon any matter brought before it (including all Category A decisions) on or before the expiration of the prescribed period for action by the Governance Committee (or the period of any extension agreed to by Cal-Am), or if the Governance Committee affirmatively waives its right to make a decision or recommendation respecting a matter before it, then Cal-Am may make the subject decision without a decision or recommendation, as applicable, by the Governance Committee. MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 5, Packet Page 5 Redline – February 21, 2013 – Subject to Revision 5 C. Cal-Am Status Presentations and Governance Committee Recommendations Thereon. At each meeting of the Governance Committee, Cal-Am shall provide a report as to the status of the Project, which shall be presented by one or more individuals knowledgeable about the material aspects of the Project. Upon reasonable advance, written notice, the Governance Committee may request that Cal-Am include within its status presentation to the Governance Committee the status of any matter that is set forth in any of the three categories for decision, recommendation, or consultation established below, together with an explanation of any pending or soon-to-be-pending decisions or options concerning the subject matter. The Governance Committee may issue, in writing, any recommendation concerning a subject matter included within Cal-Am’s presentation. Cal-Am may determine, at its sole discretion, whether or not to follow the recommendation, provided that if Cal-Am chooses not to follow the recommendation and the subject matter is a matter covered by either Category A or Category B, Cal-Am shall, within ten (10) calendar days following issuance of the Governance Committee’s recommendation, provide a written explanation of the reason(s) for Cal-Am’s decision not to follow the recommendation. If the subject matter is a matter covered by Category C or is not set forth within any of the three categories set forth below, Cal-Am need not issue a written explanation of Cal- Am’s reasons for its decision not to follow the recommendation. D. Categories for Matters Subject to Governance Committee Action. Matters for consideration, consultation, decision, or recommendation by the Governance Committee shall be divided among the following three categories as follows: Category A 1. This matter concerns the “GWR Recommendation,” which specifically is whether Cal-Am shall: (i) pursue a water purchase agreement, acceptable to Cal-Am, for the purchase of water from the GWR Project, and consequently Cal-Am shall develop smaller Desalination Infrastructure with a capacity of approximately 6.4 MGD (or as specified in the CPCN); or (ii) forgo the pursuit of a water purchase agreement for the GWR Project, and consequently Cal -Am shall develop larger Desalination Infrastructure with a capacity of approximately 9.6 MGD (or as specified in the CPCN). If the GWR Recommendation becomes ripe for recommendation, as specified in the paragraph below, before a CPCN is issued upon Application A.12-04-019, the Governance Committee shall not issue any binding recommendation [Cal-Am to advise whether this is problematic] concerning the GWR Recommendation. If the GWR Recommendation becomes ripe for recommendation, as specified in the paragraph below, after a CPCN is issued upon Application A.12-04-019, the Governance Committee shall decide whether to recommend that Cal-Am pursue the GWR Project or not (as set forth above), which recommendation shall then be subject to CPUC approval or rejection pursuant to the procedure specified herein. The Governance Committee shall make this recommendation based upon criteria to be mutually-agreed to by the Parties, negotiating in good-faith, after the execution of this Agreement. The GWR Recommendation shall become ripe for a recommendation to be made by the Governance Committee (i) no earlier than the date Cal-Am accepts the 30% Design from the contractor retained for the design of the Desalination Infrastructure, (ii) no later than that date upon which Cal-Am is prepared to issue a notice to proceed to a contractor to commence construction of the Desalination Infrastructure, (iii) after the CEQA lead agency has certified the environmental impact report for the GWR Project and approved the GWR Project has received environmental review consistent with the provisions of CEQA, and (iv) while there is sufficient time for the GWR Recommendation to be made and for the CPUC to review and approve that recommendation, without otherwise delaying the Project. The GWR Recommendation shall be made by the Governance Committee, in writing with an explanation of the reasons for its decision, within sixty (60) days following receipt of the Cal-Am Notification concerning this matter. The recommendation issued by the Governance Committee shall be submitted by Cal-Am to the CPUC for approval or rejection pursuant to a Tier 2 Advice Letter (or at the direction of the CPUC, an alternate form of submission) within ten (10) calendar days following issuance of the GWR Recommendation by the Governance Committee for the CPUC’s review and approval. To avoid undue delay of the Project, and notwithstanding the ripeness of the GWR Recommendation as described above, if (i) the CEQA lead agency has not certified an impact report and approved or (ii) the CEQA lead agency has certified an environmental impact report and approved the GWR Project, but, (a) the statute of Formatted: Indent: First line: 1" MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 6, Packet Page 6 Redline – February 21, 2013 – Subject to Revision 6 limitations to challenge that action has not lapsed, or (b) the CEQA lead agency has not resolved any litigation challenging the adequacy of the environmental impact report or the process of adopting that report, consistent with the provisions of CEQA, is not projected to be completed withinon the date that is ninety (90) days priorof to the that date upon which Cal-Am anticipates being prepared to issue a notice to proceed to a contractor to commence construction of the Desalination Infrastructure, no public agency has issued a resolution or order that declares that it is prepared to issue a notice to proceed to a contractor to commence construction of the GWR Project, then Cal-Am may make the decision with respect to the GWR Recommendation, in its sole discretion, Cal-Am may commence construction of the Desalination Infrastructure without soliciting or first obtaining the GWR Recommendation from the Governance Committee. 1.2. The Governance Committee shall select a Value Engineer(s) to facilitate and report on the proposed value engineering for the Desalination Project, with consideration given to any recommended engineer submitted by any member of the Governance Committee. Cal-Am shall conduct the procurement for the Value Engineer and, consistent with the processes set forth in Categories B(1), B(2) and C(2) relating to Contracts, seek recommendations from the Governance Committee for the contract between Cal-Am and the Value Engineer. After reviewing the results of the procurement process, the Governance Committee shall decide which engineer is to be retained by Cal-Am as the Value Engineer for the Desalination Project. [Cal-Am to suggest language re procurement process for retention on the Value Engineer] This matter shall be ripe for decision before Cal-Am accepts the 30% Design from the design-build contractor retained for the design of the Desalination Infrastructure, or at any other time that Cal-Am intends to retain a Value Engineer for any other infrastructure constructed as a component of the Desalination Project. 2.3. Subsequent to the issuance of the CPCN and subsequent to the selection of any design-build contractor(s) for the Desalination Infrastructure, the Governance Committee may issue decisions concerning the Desalination Infrastructure’s architectural renderings for the Desalination Project. The Governance Committee shall be presented with architectural renderings for decisions regarding the same when such architectural renderings are complete and upon any subsequent modifications thereto. The Governance Committee may also, in its discretion, appoint a representative to consult with Cal-Am regarding other external features or aesthetics of the Desalination Project. Upon a determination of the Governance Committee or its representative, the Governance Committee’s representative and Cal-Am shall present to the Governance Committee options pertaining to the Desalination Project’s external feature or aesthetics, upon which the Governance Committee may decide which option to pursue. Notwithstanding any provision of this paragraph, the Governance Committee may not issue a binding decision concerning the Desalination Infrastructure’s architectural renderings, or t he Desalination Project’s external features or aesthetics, if the decision would in the opinion of the design- build contractor, increase the capital or operational cost of the Desalination Infrastructure. 3.4. Subsequent to the issuance of the CPCN and subsequent to the selection of the design-build contractor for the Desalination Infrastructure, the Governance Committee may issue decisions concerning procurement of additionalalternative (non-Pacific Gas & Electric) energy supplies for the Desalination Infrastructure, including but not limited to waste-to-energy, so long as such decisions result in lowering the Desalination Infrastructure’s estimated unit price for power. This matter shall be ripe for decision at any time a formal written proposal concerning alternative power is presented by one or more of the Parties for consideration. Category B 1. Prior to the issuance of a request for qualifications, request for proposals, or request for bids, as applicable, relating to the procurement of a Contract, the Governance Committee may recommend qualifications and selection criteria for such Contract. 2. Prior to the execution of any Contract not executed on or before the date that is thirty (30) calendar days after the effective date of this Agreement, and upon presentation and recommendation by Cal-Am to the Governance Committee after Cal-Am has reviewed and evaluated MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 7, Packet Page 7 Redline – February 21, 2013 – Subject to Revision 7 proposals or bids, as applicable, and negotiated with the contractor a Contract that, in the opinion of Cal - Am, is ready for execution by and between Cal-Am and the contractor, the Governance Committee may recommend which contractor should be retained under the Contract, and issue any recommendations concerning the terms of the final Contract. When presenting a Contract to the Governance Committee for its consideration and recommendation, Cal-Am shall provide to the Governance Committee a copy of all responsive proposals or bids received for the pertinent work, except for any proprietary information provided by contractors submitting responsive proposals or bids, together with a written description of the process Cal-Am undertook to select a recommended Contractor, a summary of the considerations that Cal-Am deems pertinent to support its recommendation, and any other information that Cal -Am believes will assist the Governance Committee in its review of the recommended Contract and contractor. 3. The Governance Committee may review and issue recommendations concerning major changes to the Desalination Project at key stages of the design process, including: Basis of Design 30% Design 60% Design Value Engineering 90% Design, and Final Design As used in this paragraph, major changes to the Project shall include changes having an increase or decrease in costs of the Desalination Project that exceed $1 million. 4. The Governance Committee may issue recommendations concerning the establishment of a community outreach program. 5. The Governance Committee may recommend the Desalination Project’s aesthetic attributes and design consistent with community values if not covered by Category A(3) above; 6. The Governance Committee may coordinate with Cal-Am and recommend solutions to issues concerning the use of the Brine Discharge Infrastructure; 7. The Governance Committee may review and recommend whether to adopt any value engineering recommendations issued by the Value Engineer; 8. The Governance Committee may review and recommend whether to approve any change order pertaining to any component or components of the Desalination Project, if the change order exceeds $1 million. Category C 1. Cal-Am shall monitor the design, engineering, and permitting of all elements of the Desalination Project, and report on such monitoring to the Governance Committee as described in Section VI. The Governance Committee shall discuss Cal-Am’s report and may issue recommendations to Cal-Am pertaining to the Desalination Project; 2. Prior to Cal-Am’s commencement of negotiations with a selected contractor relating to a Contract, the Governance Committee may review and issue recommendations concerning contract terms relating to such Contract; 3. The Governance Committee may review and issue recommendations concerning the preparation and quarterly update of an overall construction budget for the Desalination Project; MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 8, Packet Page 8 Redline – February 21, 2013 – Subject to Revision 8 4. The Governance Committee may review and issue recommendations concerning a plan for acceptance testing, including follow-up reporting, for the Desalination Project; 5. The Governance Committee may annually review and issue recommendations concerning the Desalination Project operations and maintenance budget and rate impacts; 6. The Governance Committee may review and issue recommendations to Cal-Am with respect to local and regional permit requirements; and 7. The Governance Committee may review and issue recommendations concerning the preparation of quarterly progress reports during major design milestones (i.e., 30% design, 60% design, 90% design, and final design) and information on any material challenges to the Project design. E. Additional Matters. If agreed unanimously by all members of the Governance Committee, including Cal-Am, additional matters not provided for herein may be added to Category A for decision or recommendation by the Governance Committee or to Category B for recommendation from the Governance Committee. Additional matters may also be added to Category C for recommendation from the Governance Committee upon affirmative vote of the Governance Committee unless Cal -Am determines that the addition of the matter to Category C would unreasonably delay the Project or otherwise compromise the public interest. If Cal-Am determines that a matter affirmed by the Governance Committee for addition to Category C should not be so added, Cal -Am shall issue a written explanation to the Governance Committee within ten (10) calendar days following the Governance Commit tee’s vote to add the matter to Category C that explains the reasons supporting Cal-Am’s determination. VI. Meetings and Action of the Governance Committee; Agendas and Minutes A.Meetings. Governance Committee meetings shall be conducted in compliance with the Ralph M. Brown Act (Government Code sections 54950, et seq.). The first meeting of the Governance Committee shall be scheduled by the primary representative of the MPWMD, and that representative shall preside over the first meeting at which a Chair and Vice-Chair shall be selected. Thereafter, the Chair, or in his or her absence, the Vice-Chair, shall schedule and preside over all meetings of the Governance Committee. During the pre-construction and construction phases of the Desalination Project, regular meetings of the Governance Committee shall be scheduled by the Chair, or in his or her absence, the Vice-Chair, and held on a monthly basis. During the operational phase of the Desalination Project, regular meetings of the Governance Committee shall be scheduled by the Chair, or in his or her absence, the Vice-Chair, and held on a quarterly basis for the first two years of the Desalination Project’s operation and semi-annually thereafter. Special meetings of the Governance Committee, including for purposes of responding to a Cal-Am Notification, may be called by the Chair, or in his or her absence, the Vice-Chair, or by any member of the Governance Committee upon request of the Chair, or in his or her absence, the Vice-Chair.The first meeting of the Governance Committee shall be scheduled by the primary representative of the MPWMD, and that representative shall preside over the first meeting at which a Chair and Vice-Chair shall be selected. Thereafter, the Chair, or in his or her absence, the Vice-Chair, shall schedule and preside over all meetings of the Governance Committee. During the pre-construction and construction phases of the Desalination Project, regular meetings of the Governance Committee shall be scheduled by the Chair, or in his or her absence, the Vice-Chair, upon reasonable advance notice, and held on a monthly basis. During the operational phase of the Desalination Project, regular meetings of the Governance Committee shall be scheduled by the Chair, or in his or her absence, the Vice-Chair, upon reasonable advance notice, and held on a quarterly basis for the first two years of the Desalination Project’s operation and semi - annually thereafter. By unanimous agreement of the Parties, any regular meeting may be canceled. Special meetings of the Governance Committee, including for purposes of responding to a Cal-Am Notification, may be called by the Chair, or in his or her absence, the Vice-Chair, or by any member of the Governance Committee upon request of the Chair, or in his or her absence, the Vice-Chair. Meetings of the Governance Committee shall be held at the office of the MPWMD or other location agreed to by the Parties. Governance Committee meetings shall be conducted in compliance with the Ralph M. Brown Act (Government Code sections 54950, et seq.). The Board may use teleconferencing Formatted: Left, Outline numbered + Level: 2 + Numbering Style: A, B, C, … + Start at: 1 + Alignment: Left + Aligned at: 0.67" + Tab after: 1.17" + Indent at: 0.17" MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 9, Packet Page 9 Redline – February 21, 2013 – Subject to Revision 9 in connection with any meeting in conformance with and to the extent authorized by applicable law. The Governance Committee may adjourn to closed session for purposes authorized by the Brown Act. The following shall be the order of business of all meetings of the Governance Committee: 1.Call to Order 2.Roll Call 3.Pledge of Allegiance 4.Public Comment 5.Report from Governance Committee Members 6.Approval of Minutes of the Previous Meeting 7.Project Status Report by Cal-Am 8.Agenda Items 9.A. Adjournment A.B. Action by the Governance Committee. All decisions and recommendations of the Governance Committee issued to Cal-Am shall be in writing, signed by the Chair or Vice-Chair. All other actions of the Governance Committee shall be by motion recorded in written minutes. B.C. Agendas, Correspondence, and Minutes. Agendas, correspondence, and minutes of the meetings of the Governance Committee shall be taken, maintained, and distributed by a designated staff member of the MPWMD. VII. Quorum and Affirmative Action of the Governance Committee To constitute a quorum at all meetings of the Governance Committee for the transaction of business, the primary or alternate elected official representative of all three at least three of the PartiesPublic Entity Members of the Governance Committee must be present, in person. Action by the Governance Committee shall require the affirmative vote of at least two of the three Public Entity Members of the Governance Committee. VIII. Submission of Project Information to the Governance Committee; Project Inspections Concurrent with Cal-Am’s submission of any documents concerning the Project to the CPUC, Cal -Am shall provide a copy of the documents (in paper or electronic form) to the Chair of the Governance Committee. The Chair may notice a meeting on his or her own initiative, or upon the request of any member of the Governance Committee to review any financial matter addressed by the documents. Cal - Am, upon request of the Chair of the Governance Committee, shall be afforded an opportunity to provide a presentation or any oral explanation relating to the noticed financial matter. Further, upon reasonable advanced, written notice and subject to safety and security concerns and precautions as determined in good faith by Cal-Am, any member(s) of the Governance Committee may inspect any physical facility or structure constructed or being constructed as an element of the Desalination Project, and Cal -Am shall provide an employee, consultant, or other representative, who is knowledgeable of the aspects and elements of the physical facility or structure, to accompany the member(s) of the Governance Committee during the inspection. IX. Term and Termination of Agreement Formatted: Outline_L2, Left Formatted: Bullets and Numbering Comment [rmm1]: Note: I used three of the parties rather than two public and Cal-Am because it would not be proper to exclude a quorum if 3 publics show but Cal-Am does not MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 10, Packet Page 10 Redline – February 21, 2013 – Subject to Revision 10 This Agreement shall continue in effect until the earlier of (1) the date that is forty (40) years after the effective date of this Agreement (February 19__, 2053), or (2) the date that Cal-Am ceases to operate the Desalination Project, the earlier such date to be known as the “Expiration Date”. Further, this Agreement may be terminated, prior to the Expiration Date, as follows: (1) by Cal-Am, following the issuance of an order from the CPUC ordering Cal-Am not to participate in this Agreement, as provided for in Section I above; (2) by Cal-Am, if the CPUC denies or rescinds Application A.12-04-019 or denies Cal-Am’s development of, or subsequently rescinds Cal-Am’s authority to develop, the Desalination Project within the CPUC’s issuance of a CPCN upon Application A.12-04-019; or (3) by the written agreement of no less than three of the four members of the Governance Committee. If, on August __13, 2052, the Desalination Project is still being operated by Cal-Am, the Parties shall, within thirty days thereafter, meet and commence negotiations in good faith to seek a renewal of this Agreement, upon mutually acceptable terms, to provide continued public oversight and input concerning the operation, maintenance, repair, modification, and/or replacement of the Desalination Project after the Expiration Date. If this Agreement is terminated by Cal-Am as a result of a CPUC order denying or rescinding Application A.12-04-019 or Cal- Am’s authority to develop the Desalination Project, but Cal-Am intends to seek CPUC approval to develop a substitute project to provide water supplies for its Monterey District, then the Parties shall meet and negotiate in good faith to seek agreement, upon mutually acceptable terms, for a substitute agreement to provide public oversight and input concerning the design, permitting, construction, operation, maintenance, repair, modification, and/or replacement of such substitute project. X. Miscellaneous A. Further Assurances. The Parties shall execute such further documents and do any and all such further things as may be necessary to implement and carry out the intent of this Agreement. B. Construction. The provisions of this Agreement shall be liberally construed to effectuate its purposes. The language of this Agreement shall be construed simply according to its plain meaning and shall not be construed for or against any Party, as each Party has participated in the drafting of this Agreement and had the opportunity to have their counsel review it. C. Choice of Law. This Agreement shall be governed and construed under the laws of the State of California, with venue proper only in Monterey County. D. Severability. If any term or provision of this Agreement is determined to be illegal, unenforceable, or invalid in whole or in part for any reason, such illegal, unenforceable, or invalid provision or part thereof, shall be stricken from this Agreement, and such provision shall not affect the legality, enforceability, or validity of the remainder of this Agreement. If any provision or part of this Agreement is stricken in accordance with the provisions of this section, then the stri cken provision shall be replaced, to the extent possible and as agreed to by the Parties, with a legal, enforceable and valid provision that is as similar in content to the stricken provision as is legally possible. E. Dispute Resolution. If a dispute arises between two or more of the Parties relating to this Agreement, or the rights and obligations arising therefrom, and if the Parties in dispute are unable to resolve the controversy through informal means, the Parties in dispute may, upon mutual agreement, submit the dispute to mediation, upon terms mutually agreed to by the Parties in dispute. Any Party not in dispute as to the disputed matter shall be afforded an opportunity to participate in the mediation. In addition, if the Parties in dispute are unable to resolve the controversy through mediation, the Parties in dispute may, upon mutual agreement, submit the dispute to binding arbitration, upon terms mutually agreed to by the Parties in dispute. Any Party not in dispute as to the disputed matter may, upon the mutual agreement of the Parties in dispute, be invited to participate in any binding the arbitration. F. Members to Bear their Own Costs. Each Party shall bear its own costs relating to the rights and obligations of each Party arising from this Agreement and its participation in the Governance Committee and, therefore, no Party shall be entitled to any reimbursement from another Party as a result of any provision of this Agreement. Formatted: Highlight MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 11, Packet Page 11 Redline – February 21, 2013 – Subject to Revision 11 G. Notices and Communication. Any notice or communication hereunder shall be deemed sufficient if given by one Party to another Party or Parties, as appropriate, in writing and either (1) delivered in person, (2) transmitted by electronic mail or facsimile and acknowledgment of receipt is made by the receiving Party(ies), or (23) deposited in the United States mail in a sealed envelope, certified and with postage and postal charges prepaid, or (4) delivered by a nationally-recognized overnight delivery courier service, and addressed as follows: If to Cal-Am: with a copy to: California-American Water Company Attn: Robert MacLean President 1033 B Avenue, Suite 200 Coronado, CA 92118 Email: [email protected] California-American Water Company Attn: Anthony Cerasuolo Vice President - Legal 1033 B Avenue, Suite 200 Coronado, CA 92118 Email: [email protected] If to the MPRWA: with copies to: Monterey Peninsula Regional Water Authority Attn: Lesley Milton Clerk City of Monterey 351 Madison St. Monterey, CA 93940 [email protected] Monterey Peninsula Regional Water Authority Attn: Donald Freeman General Counsel West Side of San Carlos & 8th P.O. Box 805San Carlos & 8th Avenue Carmel, CA 93921 [email protected] Monterey Peninsula Regional Water Authority Attn: Russell McGlothlin Special Counsel 21 E. Carrillo St., Santa Barbara, CA 93101 [email protected] If to the MPWMD: with a copy to: Monterey Peninsula Water Management District Attn: David J. Stoldt General Manager 5 Harris Court – Bldg G Monterey, CA 93940 Email: [email protected] Monterey Peninsula Water Management District Attn: David C. Laredo General Counsel 5 Harris Court – Bldg G Monterey, CA 93940 MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 12, Packet Page 12 Redline – February 21, 2013 – Subject to Revision 12 [email protected] If to the County: with a copy to: County of Monterey Board of Supervisors C/O Clerk of the Board of Supervisors 168 West Alisal Street 1 st Floor Salinas, CA, 93901 [email protected] Monterey County Counsel Attn: Charles J. McKee 168 West Alisal Street 3 rd Floor Salinas, CA 93901 [email protected] or to such other address or to such other person as each Party shall have last designated for receipt of notices pursuant to this Agreement. Where this Agreement provides for written notices or communication from Cal-Am to the Governance Committee, such written notice, explanation, or communication shall be directed to the Chair of the Governance Committee at the address set forth above for notices to the public entity from which the Chair is appointed, and when provided shall be deemed provided to all Public Entity Members of the Governance Committee. The effective date of any written notice, explanation, or communication shall be the earlier of the date of actual receipt, acknowledgment of receipt, or three days following deposit in the United States mail. H. Successors and Assigns. This Agreement shall be binding on and shall inure to the benefit of the Parties and their respective legal representatives, successors, and assigns. H.I. No Third Party Rights. Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the Parties to this Agreement and their respective successors and assigns, nor shall any provision in this Agreement give any third persons any right of subrogation or action over or against any Party to this Agreement. I.J. Effective Date. This Agreement shall take effect on date first stated above. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first stated above. [signature page follows] Formatted: Outline numbered + Level: 2 + Numbering Style: A, B, C, … + Start at: 1 + Alignment: Left + Aligned at: 0.67" + Tab after: 1.17" + Indent at: 0.17" Formatted: Bullets and Numbering MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 13, Packet Page 13 Redline – February 21, 2013 – Subject to Revision 13 California-American Water Company By:_______________________________ Robert MacLean, President Monterey Peninsula Regional Water Authority By:_______________________________ Chuck Della Sala President Agreed as to form: By:_______________________________ Donald Freeman General Counsel Monterey Peninsula Water Management District By:_______________________________ David Pendergrass Chair Agreed as to form: By:_______________________________ David Laredo General Counsel County of Monterey By:_______________________________ Fernando Armenta Chair of the Board of Supervisors Agreed as to form: By:_______________________________ Charles McKee County Counsel MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 14, Packet Page 14 Redline – February 21, 2013 – Subject to Revision 1 AGREEMENT TO FORM THE MONTEREY PENINSULA WATER SUPPLY PROJECT GOVERNANCE COMMITTEE This AGREEMENT TO FORM THE MONTEREY PENINSULA WATER SUPPLY PROJECT GOVERNANCE COMMITTEE (“Agreement”) is made and entered into as of February __, 2013, by and among the MONTEREY PENINSULA REGIONAL WATER AUTHORITY (“MPRWA”), the MONTEREY PENINSULA WATER MANAGEMENT DISTRICT (“MPWMD”), the COUNTY OF MONTEREY (“County”), and the CALIFORNIA-AMERICAN WATER COMPANY (“Cal-Am”). The MPRWA, the MPWMD, the County, and Cal-Am are sometimes referred to individually herein as a “Party,” and collectively as the “Parties.” I. Formation of Governance Committee Pursuant to the terms of this Agreement, the Parties hereby form the Monterey Peninsula Water Supply Project Governance Committee (“Governance Committee”) comprised of representatives of the MPRWA, the MPWMD, the County, and Cal-Am to ensure efficient and effective public input into the development and operation of the Monterey Peninsula Water Supply Project (“Project”). Cal-Am’s entry into this Agreement is expressly conditioned upon its legal obligations to abide by the orders and decisions of the California Public Utilities Commission (“CPUC”). Therefore, should the CPUC order Cal- Am not to participate in this Agreement, Cal-Am shall be relieved of all obligations set forth in this Agreement and this Agreement may be terminated by Cal-Am upon such CPUC order. Further, if the CPUC issues any order or decision that conflicts with any particular provision of this Agreement, Cal-Am shall be relieved of any and all obligations to abide by the conflicting provision of this Agreement. II. Definitions A. Application A.12-04-019. Application of California-American Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to Recover All Present and Future Costs in Rates, filed with the CPUC on or about April 23, 2012. B. ASR Infrastructure. The facilities used to inject into and extract potable water from the Seaside Groundwater Basin, as described in Application A.12-04-019. These facilities will include the Aquifer Storage and Recovery (“ASR”) wells and related appurtenances, the backflush pipeline, the recirculation pipeline and the ASR pipeline. C. Brine Discharge Infrastructure. Facilities located outside the desalination plant site that are used to dispose of brine into the ocean. These facilities will include the brine disposal pipeline, the brine receiving station, any modification to the MRWPCA existing outfall, or a new outfall, or potentially the use of other existing outfalls with or without modifications. D. Cal-Am Notification. The written notification from Cal-Am to the Chair of the Governance Committee that a matter is ready for consideration, consultation, or action by the Governance Committee as provided herein, and as further defined within Section V.B. E. CEQA. The California Environmental Quality Act. F. Contracts. One or more of the contracts between Cal-Am and a selected contractor, valued in excess of $1 million, relating to the design and/or construction of the following facilities: (1) the Desalination Infrastructure, (2) the Source Water Infrastructure, (3) the Brine Discharge Infrastructure contracted for by Cal-Am, (4) the Product Water Pipeline, (5) the Raw Water Pipeline; (6) the ASR Infrastructure, and (7) the Terminal Reservoir Infrastructure. Contracts for one or more of the facilities identified above in this definition may be combined into a single contract. In addition, the design and construction of a single facility identified above in this definition may be combined into a single contract. MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 15, Packet Page 15 Redline – February 21, 2013 – Subject to Revision 2 G. CPCN. The Certificate of Public Convenience and Necessity, if ordered by the CPUC, within Application A.12-04-019. H. Desalination Infrastructure. Facilities located within the desalination plant site that are used to create potable water from either an ocean source water, brackish source water or a combination thereof, and appurtenant facilities needed to dispose of brine to the Brine Discharge Infrastructure, dispose of wastewater (i.e. process water and sanitary discharge), and any needed facilities that may be required to prevent export of native Salinas River Groundwater Basin water. I. Desalination Project. The combination of the Desalination Infrastructure, the Brine Discharge Infrastructure, the Source Water Infrastructure, the Product Water Pipeline, the Raw Water Pipeline, and the Terminal Reservoir Infrastructure. J. GWR Project. Groundwater replenishment project to be implemented by MRWPCA and/or MPWMD which involves advanced treatment of wastewater and the injection of product replenishment water into the Seaside Groundwater Basin. This project includes facilities for the treatment, conveyance, and injection of the product replenishment water. K. MRWPCA. The Monterey Regional Water Pollution Control Agency. L. Product Water Pipeline. Facilities used to convey potable water from the Desalination Infrastructure to the Terminal Reservoir Infrastructure and to Cal-Am’s existing distribution system at the Eardley Pump Station. M. Project. The Monterey Peninsula Water Supply Project as proposed in Application A.12-04-019, and as it may be modified by the CPCN issued in response to that Application. N. Public Entity Members of the Governance Committee. The MPRWA, the MPWMD, and the County. Cal-Am is not a Public Entity Member of the Governance Committee. O. Raw Water Pipeline. Facilities used to convey feedwater (i.e., raw water) from the Source Water Infrastructure to the Desalination Infrastructure. P. Source Water Infrastructure. Wells and appurtenant facilities (or alternative contingent intake facilities) that are used to extract and convey feedwater (i.e., raw water) to the Raw Water Pipeline. These facilities will include the slant intake wells and related appurtenances (if permitted) as well as alternate contingent intakes such as a Ranney Well or open ocean intake as submitted by Cal-Am in its contingency plans. Q. Terminal Reservoir Infrastructure. Facilities used to pump and store potable water in storage tanks east of the City of Seaside along General Jim Moore Boulevard. These facilities will include the terminal reservoir, terminal reservoir pump station, overflow facilities and related appurtenance needed to assist in the moving of water to and from the ASR Infrastructure, other ASR facilities, and Product Water Pipeline. R. Value Engineer. The professional engineer(s) to be retained by, or to consult with, Cal- Am to perform a value engineering analysis for the Desalination Project to potentially lower the costs of, or maximize the value of, the Desalination Project to Cal-Am’s ratepayers, including matters concerning the cost effectiveness, performance, reliability, quality, safety, durability, effectiveness, or other desirable characteristics of the Desalination Project. The Parties acknowledge that the Project is still under development and several aspects of the Project may be modified as planning continues and as may be ordered by the CPUC. If necessary to address future modifications to the Project, the Parties agree to cooperate in good faith to reach agreement to amend the definitions set forth herein as necessary to fulfill the purpose of this Agreement. MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 16, Packet Page 16 Redline – February 21, 2013 – Subject to Revision 3 III. Membership and Voting Each of the Public Entity Members of the Governance Committee shall be represented on the Governance Committee by one elected official of such entity and one alternate who shall also be an elected official. No individual person may be appointed as the primary or alternate representative of more than one Party. If MPRWA ceases to exists, then the cities that are members of the MPRWA at the time of the MPRWA’s termination shall collectively choose a “city representative” that will take the place of the MPRWA representative on the Governance Committee. Cal Am shall be represented by the President of Cal-Am or the President’s alternate, whom the President may designate to act on his or her behalf at anytime. The Governance Committee shall appoint a “Chair” and “Vice-Chair” from the primary (non- alternate) elected officials appointed to the Governance Committee. Each of the Public Entity Members of the Governance Committee shall have a single equal vote in decision-making. Cal-Am shall not have a vote for purposes of the issuance of decisions or recommendations by the Governance Committee. However, Cal-Am shall, unless it abstains from doing so, state its preference with respect to any decision or recommendation made by the Governance Committee (the “Cal-Am Preference”) at the time that any decision or recommendation is made by the Governance Committee and the Cal-Am Preference shall be recorded within the meeting minutes together with a summary of any explanation provided by Cal-Am for the Cal-Am Preference. IV. Powers A. Purpose. The purpose and function of the Governance Committee shall be to: (i) consult with, advise and, in some circumstances, provide direction to, Cal-Am concerning the design, permitting, construction, operations, maintenance, repairs, and replacements of the components of the Desalination Project; and (ii) serve as the entity which Cal-Am regularly updates as to Desalination Project status and issues. The members of the Governance Committee shall diligently consider all matters and cause the Governance Committee to timely and promptly issue decisions or recommendations brought before it as provided pursuant to the terms of this Agreement. B. Waiver of Action. Upon motion and affirmative vote of the Governance Committee (pursuant to Section VII of this Agreement), the Governance Committee may choose to waive its right to issue a decision or recommendation with respect to any matter for which the Governance Committee is afforded such right herein. The purpose of the Governance Committee’s right to waive its right to make any specified decision or recommendation herein is to empower the Governance Committee to avoid issuing any decision or recommendation, which, in its determination, would violate any law, unreasonably delay efforts to develop water supplies for the Monterey Peninsula, or otherwise compromise the public interest. V. Governance Committee Action; Procedures A. Matters Subject to Governance Committee Action. Matters for consideration, consultation, decision, or recommendation by the Governance Committee shall be divided among three categories, with varying processes for consultation, recommendations, and/or decision-making, as follows: Category A: The Governance Committee makes the decision or recommendation respecting the matter after receipt of a written recommendation from Cal-Am, and upon issuance of its decision or recommendation, the Governance Committee provides a written explanation of the reasons for its decision to Cal-Am within seven (7) calendar days following its decision or recommendation. Thereafter, Cal-Am will comply with the decision or recommendation issued by the Governance Committee so long as the decision or recommendation is consistent with the terms of this Agreement. However, notwithstanding any provision of this Agreement, for any matter covered by Category A that relates to an action which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, as defined by section 21065 of the California Public Resources Code, no decision or recommendation shall be made by the Governance Committee as to the subject matter unless MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 17, Packet Page 17 Redline – February 21, 2013 – Subject to Revision 4 and until such time as the action has been subject to review by an appropriate agency in accordance with CEQA. The foregoing provision shall not be construed as an agreement or determination by or among any of the Parties that CEQA applies to any action of the Governance Committee. This Agreement is itself not a “project” as defined by section 15378 of the CEQA Guidelines (California Code of Regulations, Title 14, Chapter 3) because it is an organizational activity that will not result in direct or indirect physical changes in the environment and this Agreement makes no commitment to any project. Category B: The Governance Committee makes a recommendation respecting the matter after receipt of a written recommendation from Cal-Am. However, Cal-Am may determine, at its sole discretion, whether or not to follow the Governance Committee’s recommendation, provided that if Cal-Am chooses not to follow the recommendation, Cal-Am shall provide a written explanation of Cal-Am’s reasons for its decision not to follow the recommendation within ten (10) calendar days following the issuance of the Governance Committee’s recommendation. Further, should Cal-Am choose not to follow the recommendation of the Governance Committee, then any Party may raise the issue for review by the CPUC during Cal-Am’s next general rate case. Category C: Cal-Am makes the decision respecting the matter after receiving a recommendation from the Governance Committee. Cal-Am need not issue a written explanation for its decision, although should Cal-Am choose not to follow the recommendation of the Governance Committee, then any Party may raise the issue for review by the CPUC during Cal- Am’s next general rate case. B. Procedure for Cal-Am Notification. Whenever Cal-Am is presented with, or becomes aware of, a matter that falls within any of the subjects identified herein for consideration, consultation, decision or recommendation by the Governance Committee that is ripe for presentation to the Governance Committee, Cal-Am shall, in writing, promptly notify the Chair of the Governance Committee (“Cal-Am Notification”), who shall schedule the matter for consideration by the Governance Committee. For purposes of this Agreement, a matter shall be deemed ripe for presentation to the Governance Committee at such time as either specified within the matters set forth below, or for any matter for which no specification is provided, Cal-Am shall determine the time(s) at which the matter is appropriate for presentation for consultation, decision, or recommendation by the Governance Committee consistent with the purpose of this Agreement. Unless a different period is specified herein, for all matters for which a decision or recommendation is to be made by the Governance Committee, the Governance Committee shall issue its decision or recommendation within ten (10) calendar days following receipt of the Cal-Am Notification. If the Public Entity Members of the Governance Committee determine that the Governance Committee requires more than the prescribed time period provided for in this Agreement to act on any matter that is the subject of the Cal-Am Notification, the Chair of the Governance Committee may, within seven (7) calendar days following receipt of the Cal-Am Notification, request a reasonable extension of time by written request to Cal-Am, and Cal-Am and the Public Entity Members of the Governance Committee shall cooperate in good faith to agree upon and set a reasonable alternative deadline for action on the subject matter to the extent that such an extension would not unreasonably delay the Project, not unreasonably delay required CPUC filings by Cal-Am, or otherwise compromise the public interest. So as to avoid undue delay, if the Governance Committee fails to make any decision or provide any recommendation upon any matter brought before it (including all Category A decisions) on or before the expiration of the prescribed period for action by the Governance Committee (or the period of any extension agreed to by Cal-Am), or if the Governance Committee affirmatively waives its right to make a decision or recommendation respecting a matter before it, then Cal-Am may make the subject decision without a decision or recommendation, as applicable, by the Governance Committee. C. Cal-Am Status Presentations and Governance Committee Recommendations Thereon. At each meeting of the Governance Committee, Cal-Am shall provide a report as to the status of the Project, which shall be presented by one or more individuals knowledgeable about the material aspects of the Project. Upon reasonable advance written notice, the Governance Committee may request that Cal-Am include within its status presentation to the Governance Committee the status of any matter that is set forth in any of the three categories for decision, recommendation, or consultation established MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 18, Packet Page 18 Redline – February 21, 2013 – Subject to Revision 5 below, together with an explanation of any pending or soon-to-be-pending decisions or options concerning the subject matter. The Governance Committee may issue, in writing, any recommendation concerning a subject matter included within Cal-Am’s presentation. Cal-Am may determine, at its sole discretion, whether or not to follow the recommendation, provided that if Cal-Am chooses not to follow the recommendation and the subject matter is a matter covered by either Category A or Category B, Cal-Am shall, within ten (10) calendar days following issuance of the Governance Committee’s recommendation, provide a written explanation of the reason(s) for Cal-Am’s decision not to follow the recommendation. If the subject matter is a matter covered by Category C or is not set forth within any of the three categories set forth below, Cal-Am need not issue a written explanation of Cal-Am’s reasons for its decision not to follow the recommendation. D. Categories for Matters Subject to Governance Committee Action. Matters for consideration, consultation, decision, or recommendation by the Governance Committee shall be divided among the following three categories as follows: Category A 1. This matter concerns the “GWR Recommendation,” which specifically is whether Cal-Am shall: (i) pursue a water purchase agreement, acceptable to Cal-Am, for the purchase of water from the GWR Project, and consequently Cal-Am shall develop smaller Desalination Infrastructure with a capacity of approximately 6.4 MGD (or as specified in the CPCN); or (ii) forgo the pursuit of a water purchase agreement for the GWR Project, and consequently Cal-Am shall develop larger Desalination Infrastructure with a capacity of approximately 9.6 MGD (or as specified in the CPCN). If the GWR Recommendation becomes ripe for recommendation, as specified in the paragraph below, before a CPCN is issued upon Application A.12-04-019, the Governance Committee shall not issue any binding recommendation concerning the GWR Recommendation. If the GWR Recommendation becomes ripe for recommendation, as specified in the paragraph below, after a CPCN is issued upon Application A.12-04- 019, the Governance Committee shall decide whether to recommend that Cal-Am pursue the GWR Project or not (as set forth above), which recommendation shall then be subject to CPUC approval or rejection pursuant to the procedure specified herein. The Governance Committee shall make this recommendation based upon criteria to be mutually-agreed to by the Parties, negotiating in good-faith, after the execution of this Agreement. The GWR Recommendation shall become ripe for a recommendation to be made by the Governance Committee (i) no earlier than the date Cal-Am accepts the 30% Design from the contractor retained for the design of the Desalination Infrastructure, (ii) no later than that date upon which Cal-Am is prepared to issue a notice to proceed to a contractor to commence construction of the Desalination Infrastructure, (iii) after the CEQA lead agency has certified the environmental impact report for the GWR Project and approved the GWR Project, and (iv) while there is sufficient time for the GWR Recommendation to be made and for the CPUC to review and approve that recommendation, without otherwise delaying the Project. The GWR Recommendation shall be made by the Governance Committee, in writing with an explanation of the reasons for its decision, within sixty (60) days following receipt of the Cal-Am Notification concerning this matter. The recommendation issued by the Governance Committee shall be submitted by Cal-Am to the CPUC for approval or rejection pursuant to a Tier 2 Advice Letter (or at the direction of the CPUC, an alternate form of submission) within ten (10) calendar days following issuance of the GWR Recommendation by the Governance Committee for the CPUC’s review and approval. To avoid undue delay of the Project, and notwithstanding the ripeness of the GWR Recommendation as described above, if on the date that is ninety (90) days prior to the date upon which Cal-Am anticipates being prepared to issue a notice to proceed to a contractor to commence construction of the Desalination Infrastructure, no public agency has issued a resolution or order that declares that it is prepared to issue a notice to proceed to a contractor to commence construction of the GWR Project, then Cal-Am may make the decision with respect to the GWR Recommendation, in its sole discretion, without soliciting or obtaining the GWR Recommendation from the Governance Committee. 2. The Governance Committee shall select a Value Engineer(s) to facilitate and report on the proposed value engineering for the Desalination Project, with consideration given to any MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 19, Packet Page 19 Redline – February 21, 2013 – Subject to Revision 6 recommended engineer submitted by any member of the Governance Committee. Cal-Am shall conduct the procurement for the Value Engineer and, consistent with the processes set forth in Categories B(1), B(2) and C(2) relating to Contracts, seek recommendations from the Governance Committee for the contract between Cal-Am and the Value Engineer. After reviewing the results of the procurement process, the Governance Committee shall decide which engineer is to be retained by Cal-Am as the Value Engineer for the Desalination Project. This matter shall be ripe for decision before Cal-Am accepts the 30% Design from the contractor retained for the design of the Desalination Infrastructure, or at any other time that Cal-Am intends to retain a Value Engineer for any other infrastructure constructed as a component of the Desalination Project. 3. Subsequent to the issuance of the CPCN and subsequent to the selection of any design-build contractor(s) for the Desalination Infrastructure, the Governance Committee may issue decisions concerning architectural renderings for the Desalination Project. The Governance Committee shall be presented with architectural renderings for decisions regarding the same when such architectural renderings are complete and upon any subsequent modifications thereto. The Governance Committee may also, in its discretion, appoint a representative to consult with Cal-Am regarding other external features or aesthetics of the Desalination Project. Upon a determination of the Governance Committee or its representative, the Governance Committee’s representative and Cal-Am shall present to the Governance Committee options pertaining to the Desalination Project’s external feature or aesthetics, upon which the Governance Committee may decide which option to pursue. Notwithstanding any provision of this paragraph, the Governance Committee may not issue a binding decision concerning the Desalination Infrastructure’s architectural renderings, or the Desalination Project’s external features or aesthetics, if the decision would in the opinion of the design-build contractor, increase the capital or operational cost of the Desalination Infrastructure. 4. Subsequent to the issuance of the CPCN, the Governance Committee may issue decisions concerning procurement of alternative (non-Pacific Gas & Electric) energy supplies for the Desalination Infrastructure, including but not limited to waste-to-energy, so long as such decisions result in lowering the Desalination Infrastructure’s estimated unit price for power. This matter shall be ripe for decision at any time a formal written proposal concerning alternative power is presented by one or more of the Parties for consideration. Category B 1. Prior to the issuance of a request for qualifications, request for proposals, or request for bids, as applicable, relating to the procurement of a Contract, the Governance Committee may recommend qualifications and selection criteria for such Contract. 2. Prior to the execution of any Contract not executed on or before the date that is thirty (30) calendar days after the effective date of this Agreement, and upon presentation and recommendation by Cal-Am to the Governance Committee after Cal-Am has reviewed and evaluated proposals or bids, as applicable, and negotiated with the contractor a Contract that, in the opinion of Cal- Am, is ready for execution by and between Cal-Am and the contractor, the Governance Committee may recommend which contractor should be retained under the Contract, and issue any recommendations concerning the terms of the final Contract. When presenting a Contract to the Governance Committee for its consideration and recommendation, Cal-Am shall provide to the Governance Committee a copy of all responsive proposals or bids received for the pertinent work, except for any proprietary information provided by contractors submitting responsive proposals or bids, together with a written description of the process Cal-Am undertook to select a recommended Contractor, a summary of the considerations that Cal-Am deems pertinent to support its recommendation, and any other information that Cal-Am believes will assist the Governance Committee in its review of the recommended Contract and contractor. 3. The Governance Committee may review and issue recommendations concerning major changes to the Desalination Project at key stages of the design process, including: • Basis of Design MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 20, Packet Page 20 Redline – February 21, 2013 – Subject to Revision 7 • 30% Design • 60% Design • 90% Design, and • Final Design As used in this paragraph, major changes to the Project shall include changes having an increase or decrease in costs of the Desalination Project that exceed $1 million. 4. The Governance Committee may issue recommendations concerning the establishment of a community outreach program. 5. The Governance Committee may recommend the Desalination Project’s aesthetic attributes and design consistent with community values if not covered by Category A(3) above; 6. The Governance Committee may coordinate with Cal-Am and recommend solutions to issues concerning the use of the Brine Discharge Infrastructure; 7. The Governance Committee may review and recommend whether to adopt any value engineering recommendations issued by the Value Engineer; 8. The Governance Committee may review and recommend whether to approve any change order pertaining to any component or components of the Desalination Project, if the change order exceeds $1 million. Category C 1. Cal-Am shall monitor the design, engineering, and permitting of all elements of the Desalination Project, and report on such monitoring to the Governance Committee as described in Section VI. The Governance Committee shall discuss Cal-Am’s report and may issue recommendations to Cal-Am pertaining to the Desalination Project; 2. Prior to Cal-Am’s commencement of negotiations with a selected contractor relating to a Contract, the Governance Committee may review and issue recommendations concerning contract terms relating to such Contract; 3. The Governance Committee may review and issue recommendations concerning the preparation and quarterly update of an overall construction budget for the Desalination Project; 4. The Governance Committee may review and issue recommendations concerning a plan for acceptance testing, including follow-up reporting, for the Desalination Project; 5. The Governance Committee may annually review and issue recommendations concerning the Desalination Project operations and maintenance budget and rate impacts; 6. The Governance Committee may review and issue recommendations to Cal-Am with respect to local and regional permit requirements; and 7. The Governance Committee may review and issue recommendations concerning the preparation of quarterly progress reports during major design milestones (i.e., 30% design, 60% design, 90% design, and final design) and information on any material challenges to the Project design. E. Additional Matters. If agreed unanimously by all members of the Governance Committee, including Cal-Am, additional matters not provided for herein may be added to Category A for decision or recommendation by the Governance Committee or to Category B for recommendation from the Governance Committee. Additional matters may also be added to Category C for recommendation MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 21, Packet Page 21 Redline – February 21, 2013 – Subject to Revision 8 from the Governance Committee upon affirmative vote of the Governance Committee unless Cal-Am determines that the addition of the matter to Category C would unreasonably delay the Project or otherwise compromise the public interest. If Cal-Am determines that a matter affirmed by the Governance Committee for addition to Category C should not be so added, Cal-Am shall issue a written explanation to the Governance Committee within ten (10) calendar days following the Governance Committee’s vote to add the matter to Category C that explains the reasons supporting Cal-Am’s determination. VI. Meetings and Action of the Governance Committee; Agendas and Minutes A. Meetings. Governance Committee meetings shall be conducted in compliance with the Ralph M. Brown Act (Government Code sections 54950, et seq.). The first meeting of the Governance Committee shall be scheduled by the primary representative of the MPWMD, and that representative shall preside over the first meeting at which a Chair and Vice-Chair shall be selected. Thereafter, the Chair, or in his or her absence, the Vice-Chair, shall schedule and preside over all meetings of the Governance Committee. During the pre-construction and construction phases of the Desalination Project, regular meetings of the Governance Committee shall be scheduled by the Chair, or in his or her absence, the Vice-Chair, and held on a monthly basis. During the operational phase of the Desalination Project, regular meetings of the Governance Committee shall be scheduled by the Chair, or in his or her absence, the Vice-Chair, and held on a quarterly basis for the first two years of the Desalination Project’s operation and semi-annually thereafter. Special meetings of the Governance Committee, including for purposes of responding to a Cal-Am Notification, may be called by the Chair, or in his or her absence, the Vice-Chair, or by any member of the Governance Committee upon request of the Chair, or in his or her absence, the Vice-Chair. B. Action by the Governance Committee. All decisions and recommendations of the Governance Committee issued to Cal-Am shall be in writing, signed by the Chair or Vice-Chair. All other actions of the Governance Committee shall be by motion recorded in written minutes. C. Agendas, Correspondence, and Minutes. Agendas, correspondence, and minutes of the meetings of the Governance Committee shall be taken, maintained, and distributed by a designated staff member of the MPWMD. VII. Quorum and Affirmative Action of the Governance Committee To constitute a quorum at all meetings of the Governance Committee for the transaction of business, the primary or alternate elected official representative of at least three of the Parties must be present, in person. Action by the Governance Committee shall require the affirmative vote of at least two of the three Public Entity Members of the Governance Committee. VIII. Submission of Project Information to the Governance Committee; Project Inspections Concurrent with Cal-Am’s submission of any documents concerning the Project to the CPUC, Cal-Am shall provide a copy of the documents (in paper or electronic form) to the Chair of the Governance Committee. The Chair may notice a meeting on his or her own initiative, or upon the request of any member of the Governance Committee to review any financial matter addressed by the documents. Cal- Am, upon request of the Chair of the Governance Committee, shall be afforded an opportunity to provide a presentation or any oral explanation relating to the noticed financial matter. Further, upon reasonable advanced, written notice and subject to safety and security concerns and precautions as determined in good faith by Cal-Am, any member(s) of the Governance Committee may inspect any physical facility or structure constructed or being constructed as an element of the Desalination Project, and Cal-Am shall provide an employee, consultant, or other representative, who is knowledgeable of the aspects and elements of the physical facility or structure, to accompany the member(s) of the Governance Committee during the inspection. IX. Term and Termination of Agreement MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 22, Packet Page 22 Redline – February 21, 2013 – Subject to Revision 9 This Agreement shall continue in effect until the earlier of (1) the date that is forty (40) years after the effective date of this Agreement (February __, 2053), or (2) the date that Cal-Am ceases to operate the Desalination Project, the earlier such date to be known as the “Expiration Date”. Further, this Agreement may be terminated, prior to the Expiration Date, as follows: (1) by Cal-Am, following the issuance of an order from the CPUC ordering Cal-Am not to participate in this Agreement, as provided for in Section I above; (2) by Cal-Am, if the CPUC denies or rescinds Application A.12-04-019 or denies Cal-Am’s development of, or subsequently rescinds Cal-Am’s authority to develop, the Desalination Project; or (3) by the written agreement of no less than three of the four members of the Governance Committee. If, on August __, 2052, the Desalination Project is still being operated by Cal-Am, the Parties shall, within thirty days thereafter, meet and commence negotiations in good faith to seek a renewal of this Agreement, upon mutually acceptable terms, to provide continued public oversight and input concerning the operation, maintenance, repair, modification, and/or replacement of the Desalination Project after the Expiration Date. If this Agreement is terminated by Cal-Am as a result of a CPUC order denying or rescinding Application A.12-04-019 or Cal-Am’s authority to develop the Desalination Project, but Cal-Am intends to seek CPUC approval to develop a substitute project to provide water supplies for its Monterey District, then the Parties shall meet and negotiate in good faith to seek agreement, upon mutually acceptable terms, for a substitute agreement to provide public oversight and input concerning the design, permitting, construction, operation, maintenance, repair, modification, and/or replacement of such substitute project. X. Miscellaneous A. Further Assurances. The Parties shall execute such further documents and do any and all such further things as may be necessary to implement and carry out the intent of this Agreement. B. Construction. The provisions of this Agreement shall be liberally construed to effectuate its purposes. The language of this Agreement shall be construed simply according to its plain meaning and shall not be construed for or against any Party, as each Party has participated in the drafting of this Agreement and had the opportunity to have their counsel review it. C. Choice of Law. This Agreement shall be governed and construed under the laws of the State of California, with venue proper only in Monterey County. D. Severability. If any term or provision of this Agreement is determined to be illegal, unenforceable, or invalid in whole or in part for any reason, such illegal, unenforceable, or invalid provision or part thereof, shall be stricken from this Agreement, and such provision shall not affect the legality, enforceability, or validity of the remainder of this Agreement. If any provision or part of this Agreement is stricken in accordance with the provisions of this section, then the stricken provision shall be replaced, to the extent possible and as agreed to by the Parties, with a legal, enforceable and valid provision that is as similar in content to the stricken provision as is legally possible. E. Dispute Resolution. If a dispute arises between two or more of the Parties relating to this Agreement, or the rights and obligations arising therefrom, and if the Parties in dispute are unable to resolve the controversy through informal means, the Parties in dispute may, upon mutual agreement, submit the dispute to mediation, upon terms mutually agreed to by the Parties in dispute. Any Party not in dispute as to the disputed matter shall be afforded an opportunity to participate in the mediation. In addition, if the Parties in dispute are unable to resolve the controversy through mediation, the Parties in dispute may, upon mutual agreement, submit the dispute to binding arbitration, upon terms mutually agreed to by the Parties in dispute. Any Party not in dispute as to the disputed matter may, upon the mutual agreement of the Parties in dispute, be invited to participate in any binding arbitration. F. Members to Bear their Own Costs. Each Party shall bear its own costs relating to the rights and obligations of each Party arising from this Agreement and its participation in the Governance Committee and, therefore, no Party shall be entitled to any reimbursement from another Party as a result of any provision of this Agreement. MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 23, Packet Page 23 Redline – February 21, 2013 – Subject to Revision 10 G. Notices and Communication. Any notice or communication hereunder shall be deemed sufficient if given by one Party to another Party or Parties, as appropriate, in writing and either (1) delivered in person, (2) transmitted by electronic mail and acknowledgment of receipt is made by the receiving Party(ies), (3) deposited in the United States mail in a sealed envelope, certified and with postage and postal charges prepaid, or (4) delivered by a nationally-recognized overnight delivery courier service, and addressed as follows: If to Cal-Am: with a copy to: California-American Water Company Attn: Robert MacLean President 1033 B Avenue, Suite 200 Coronado, CA 92118 Email: [email protected] California-American Water Company Attn: Anthony Cerasuolo Vice President - Legal 1033 B Avenue, Suite 200 Coronado, CA 92118 Email: [email protected] If to the MPRWA: with copies to: Monterey Peninsula Regional Water Authority Attn: Lesley Milton Clerk City of Monterey 351 Madison St. Monterey, CA 93940 [email protected] Monterey Peninsula Regional Water Authority Attn: Donald Freeman General Counsel West Side of San Carlos & 8th P.O. Box 805 Carmel, CA 93921 [email protected] Monterey Peninsula Regional Water Authority Attn: Russell McGlothlin Special Counsel 21 E. Carrillo St., Santa Barbara, CA 93101 [email protected] If to the MPWMD: with a copy to: Monterey Peninsula Water Management District Attn: David J. Stoldt General Manager 5 Harris Court – Bldg G Monterey, CA 93940 Email: [email protected] Monterey Peninsula Water Management District Attn: David C. Laredo General Counsel 5 Harris Court – Bldg G Monterey, CA 93940 MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 24, Packet Page 24 Redline – February 21, 2013 – Subject to Revision 11 [email protected] If to the County: with a copy to: County of Monterey Board of Supervisors C/O Clerk of the Board of Supervisors 168 West Alisal Street 1 st Floor Salinas, CA, 93901 [email protected] Monterey County Counsel Attn: Charles J. McKee 168 West Alisal Street 3 rd Floor Salinas, CA 93901 [email protected] or to such other address or to such other person as each Party shall have last designated for receipt of notices pursuant to this Agreement. Where this Agreement provides for written notices or communication from Cal-Am to the Governance Committee, such written notice, explanation, or communication shall be directed to the Chair of the Governance Committee at the address set forth above for notices to the public entity from which the Chair is appointed, and when provided shall be deemed provided to all Public Entity Members of the Governance Committee. The effective date of any written notice, explanation, or communication shall be the earlier of the date of actual receipt, acknowledgment of receipt, or three days following deposit in the United States mail. H. Successors and Assigns. This Agreement shall be binding on and shall inure to the benefit of the Parties and their respective legal representatives, successors, and assigns. I. No Third Party Rights. Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the Parties to this Agreement and their respective successors and assigns, nor shall any provision in this Agreement give any third persons any right of subrogation or action over or against any Party to this Agreement. J. Effective Date. This Agreement shall take effect on date first stated above. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first stated above. [signature page follows] MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 25, Packet Page 25 Redline – February 21, 2013 – Subject to Revision 12 California-American Water Company By:_______________________________ Robert MacLean, President Monterey Peninsula Regional Water Authority By:_______________________________ Chuck Della Sala President Agreed as to form: By:_______________________________ Donald Freeman General Counsel Monterey Peninsula Water Management District By:_______________________________ David Pendergrass Chair Agreed as to form: By:_______________________________ David Laredo General Counsel County of Monterey By:_______________________________ Fernando Armenta Chair of the Board of Supervisors Agreed as to form: By:_______________________________ Charles McKee County Counsel MPRWA Meeting, 2/28/2013 , Ìtem No. 1., Ìtem Page 26, Packet Page 26 Monterey Peninsula Regional Water Authority Agenda Report Date: February 28, 2013 Item No: 2. №08/12 FROM: Prepared By: Clerk to the Authority SUBJECT: Receive and Discuss Testimony Submitted to California Public Utilities Commission February 22, 2013 Deadline for Application (A- 12-04-019) Based on the MPRWA Approved Position Statement DISCUSSION: There is no written report for this item at this time. A copy of the testimony submitted to the CPUC is attached. MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 1, Packet Page 27 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA In the Matter of Application of California- American Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to Recover All Present and Future Costs in Rates A.12-04-019 (Filed April 23, 2012) DIRECT TESTIMONY OF JASON BURNETT RUSSELL M. MCGLOTHLIN (SBN 208826) RYAN C. DRAKE (SBN 262580) BROWNSTEIN HYATT FARBER SCHRECK, LLP 21 East Carrillo Street Santa Barbara, CA 93101 Telephone: (805) 963-7000 Facsimile: (805) 965-4333 Email: [email protected] Attorneys for: MONTEREY PENINSULA REGIONAL WATER AUTHORITY Dated: February 22, 2013 SB 637640 v7:015621.0002 1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 2, Packet Page 28 SB 637640 v7:015621.0002 2 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA In the Matter of Application of California- American Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to Recover All Present and Future Costs in Rates A.12-04-019 (Filed April 23, 2012) TABLE OF CONTENTS I. Introduction........................................................................................................................ 1 II. The Monterey Peninsula Regional Water Authority ......................................................... 2 III. MPRWA Goals and Criteria for a Desalination Project .................................................... 4 IV. MPRWA Conditions for Support of the Cal-Am Project; Reasons for Conditional Support............................................................................................................................... 5 V. Summary of Governance Committee............................................................................... 10 VI. Community Support for MPRWA Position..................................................................... 12 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 3, Packet Page 29 DIRECT TESTIMONY OF JASON BURNETT I. Introduction Q1: Please state your name and business address. A1: My name is Jason Burnett. My business address is Carmel-by-the-Sea City Hall, Monte Verde St., Carmel-by-the-Sea, CA 93921. Q2: By whom are you employed and in what capacity? A2: I am currently the Mayor of the City of Carmel-by-the-Sea, California (“City”). I was elected Mayor in 2012, and was previously a member of the City Council from 2010 through 2012. Q3: What are your responsibilities as the Mayor? A3: As the Mayor, I serve as the official head of the City for all civil and ceremonial purposes. I am also the City’s appointed representative to various local agencies including the City’s representative on the Board of the Monterey Peninsula Regional Water Authority (“MPRWA”). Q4: What offices and roles to you perform for the MPRWA? A:4 I am currently the Vice-President of MPRWA, the Chair of the MPRWA’s Technical Advisory Committee, and together with Mayor Chuck Della Sala from the City of Monterey, I am one of the two members of an ad hoc committee undertaking the MPRWA’s efforts concerning the Monterey Peninsula Water Supply Project proposed by the California-American Water Company (“Cal-Am”) as well as efforts pertaining to this proceeding before the California Public Utilities Commission (“CPUC”). I was also recently appointed as the MPRWA’s principal representative to the formed Monterey Peninsula Water Supply Project Governance Committee (“Governance Committee”), which the MPRWA anticipates will be established in the near future as discussed further below. Q5: Please describe your educational background. A5: I graduated from Stanford University in 1999 with a Bachelor of Arts in Economics and I received a Masters of Arts in Earth Systems from Stanford University in 2003. SB 637640 v7:015621.0002 1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 4, Packet Page 30 Q6: Please describe your professional experience. A6: I am the founder of Burnett EcoEnergy, a company that structures and secures financing for renewable energy and energy efficiency projects. Previously, I was the Associate Deputy Administrator of the U.S. Environmental Protection Agency where I coordinated energy and climate change policy across the EPA, and led the development of greenhouse gases regulations. I am also a trustee of the David and Lucile Packard Foundation. Q7: Have you testified before the CPUC? A7: No. Q8: What is the purpose of your testimony? A8: The purpose of my testimony is to testify as to the following subjects:  the formation, purpose, and activities of the MPRWA;  the MPRWA’s goals, concerns, and positions concerning replacement water supplies for the Monterey Peninsula and the broader community interests concerning the same;  the formation of the Governance Committee to afford public oversight and accountability in relation to the Cal-Am Project;  the MPRWA’s present position concerning the desalination project component of the Monterey Peninsula Water Supply Project (“Cal-Am Project”) and the conditions that the MPRWA has established to garner the MPRWA’s support for the Cal-Am Project;  if the MPRWA’s proposed conditions are satisfied by Cal-Am, why the MPRWA presently favors the Cal-Am Project in comparison to the two proposed alternative projects: the Deep Water Desal (“DWD”) project and the Peoples Moss Landing (“PML”) project; and  the growing community consensus in support of the MPRWA’s position concerning the Cal-Am Project. II. The Monterey Peninsula Regional Water Authority Q9: Please explain the formation of the MPRWA and the purpose for its creation. A9: The MPRWA is a Joint Power Authority (California Governance Code, sections 6500 et seq.) formed pursuant to a Joint Exercise of Powers Agreement (“JPA Agreement”) in February of 2012. The MPRWA consists of six cities: the Cities of Carmel-by-the-Sea, Del Rey Oaks, SB 637640 v7:015621.0002 2 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 5, Packet Page 31 Monterey, Pacific Grove, Sand City and Seaside. 1 As stated in the JPA Agreement, the purpose of the MPRWA is to exercise its members’ common powers to: (1) ensure the timely development, financing, construction, operation, repair, and maintenance of one or more water projects; and (2) ensure that the governance of such water projects includes representation that is directly accountable to the members’ water users. Q10: Please describe the MPRWA’s principal undertakings since its creation. A10: Since its creation in early 2012, MPRWA has performed the following principal undertakings: 1. Formed a Technical Advisory Committee to assist in carrying out the purposes and objectives of MPRWA, which is comprised of members of the community with technical and other expertise concerning water supply solutions for the Monterey Peninsula. 2. Retained Separation Processes, Inc. (“SPI”), and Kris Helm Consulting (“KHC”) to prepare a technical report entitled, “Evaluation of Seawater Desalination Projects” (“SPI Report”). The SPI report was prepared to assist the MPRWA with its evaluation of three proposed desalination projects on the Monterey Peninsula and is attached to the testimony of Alex Wesner submitted by the MPRWA concurrently herewith. 3. Held dozens of public meetings to discuss replacement water supply options for the Monterey Peninsula and affected community interests and goals. 4. Developed a draft (near final) agreement with Cal-Am, the Monterey Peninsula Water Management District (“MPWMD”), and the County to create the Governance Committee to afford public oversight and accountability in relation to the Cal-Am Project. This draft agreement is attached to this testimony as “MPRWA Exhibit 1.” 5. Engaged in ongoing negotiations with Cal-Am to seek agreement concerning an acceptable means to lower the financing costs for the Cal-Am Project through a significant contribution of public funds. Together with the MPWMD, the MPRWA has retained Robert Larkins, a financial consultant from Raymond James Financial to advise the MPRWA and MPWMD with respect to the creation of an acceptable and workable public funding method to reduce the financing costs of the Cal-Am Project. Testimony by Robert Larkins is submitted by the MPWMD concurrently with this testimony. 6. Adopted a “Position Statement” at the MPRWA’s January 31, 2013 meeting, which sets forth: (i) the criteria the MPRWA maintains are necessary for a desalination project to provide replacement water supplies for the Monterey Peninsula, and specifically the conditions that Cal-Am would need to satisfy to garner the MPRWA’s support of the Cal-Am Project; and (ii) the basis for the MPRWA’s 1 The MPRWA recently adopted a resolution that recommends the amendment of the JPA Agreement for the purpose of adding the County of Monterey (“County”) as a member of the MPRWA. An amended and restated JPA Agreement is presently being circulated for execution to add the County as a member of the MPRWA SB 637640 v7:015621.0002 3 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 6, Packet Page 32 conditional support of the Cal-Am Project if those conditions are satisfied. This Position Statement is attached to this testimony as “MPRWA Exhibit 2.” III. MPRWA Goals and Criteria for a Desalination Project Q11: What are MPRWA’s goals with respect to replacement water supplies to serve the water demands of the Monterey Peninsula? A11: The MPRWA and its members desire the timely development of replacement water supplies that are cost-effective, developed consistent with community values, and include project oversight that is directly accountable to the public served by the replacement water supplies. The MPRWA is keenly aware of the acute need to develop replacement water supplies to replace water supplies lost as a result of the State Water Resources Control Board’s Cease and Desist Order (“CDO”) against Cal-Am (SWRCB WR Order 2009-0060) with respect to its diversions from the Carmel River Valley as well as the diminished groundwater supplies available to Cal- Am from the Seaside Groundwater Basin as a result of the Seaside Basin adjudication (California-American Water Company v. City of Seaside, Monterey Superior Court, Case No. M66343). The MPRWA believes that these replacement water supplies should be developed as soon as practically feasible with the goal of completion by the 2016 deadline set forth in the CDO, or as soon thereafter as possible. The MPRWA also believes that all replacement water supply projects must be developed as cost effectively as possible under the circumstances, and must be developed by or overseen by a public agency that affords representation and accountability to the ratepayers that will be served by the replacement water supplies. The MPRWA has articulated a preference for pursuing replacement water supply projects that are sized to afford sufficient water supplies for present and near-term water demands (including additional demands resulting from economic recovery and the development of lots of record) and replenishment needs. However, the MPRWA also believes that the environmental review performed for the replacement water supply projects should evaluate the full range of project sizing, including the impact of no additional water supply and the impact of water supplies necessary to satisfy the demands anticipated for full build-out under the general plans adopted for the lands served by Cal-Am. Finally, the MPRWA supports a “portfolio approach” for replacement water supplies whereby several component projects are developed to satisfy demands rather than a single large project. Such approach is likely to provide greater water supply reliability and will allow the SB 637640 v7:015621.0002 4 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 7, Packet Page 33 projects with an easier development process to proceed without impediment from the other projects with a longer lead time. Potential viable water supply projects include desalination (subject to acceptable criteria discussed in my testimony below), aquifer storage and recovery, groundwater replenishment with advance-treated recycled water, and small local water supply projects such as those proposed by the City of Pacific Grove. Q12: What criteria does MPRWA maintain are necessary for a desalination project to provide replacement water supply for the Monterey Peninsula? A12: The MPRWA believes that any desalination project developed to provide replacement water supplies for the Monterey Peninsula must demonstrate technical and legal viability, competitive project economics, and suitable public governance, accountability and transparency. MPRWA also believes the project must demonstrate a clear and timely path to be permitted and constructed with project completion as near to the CDO deadline as feasible. Finally, any viable project must include contingency plans to address significant technical, permitting and legal risks to the development of the project. Q13: Has the MPRWA concluded that any of the three proposed desalination projects presently meet these criteria? A13: As stated in its Position Statement, the MPRWA concluded that none of the three proposed desalination projects presently meet these criteria. However, MPRWA found that the Cal-Am Project appears to hold the best potential to meet these criteria. The Cal-Am Project would therefore obtain MPRWA’s support if Cal-Am were to satisfy various conditions for the project, which is designed to avoid unwarranted expense to Cal-Am ratepayers and directly address technical, permitting and legal challenges concerning the method of intake of raw saltwater to the desalination plant—the riskiest part of the project. IV. MPRWA Conditions for Support of the Cal-Am Project; Reasons for Conditional Support Q14: What conditions did the MPRWA specify as necessary to garner the MPRWA’s support for the Cal-Am Project? A14: The conditions established by MPRWA within the Position Statement for support of the Cal-Am Project are as follows: SB 637640 v7:015621.0002 5 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 8, Packet Page 34 1. Cal-Am must accept a significant contribution of public funds or the Commission should direct Cal-Am to accept, a contribution of public funds. Without the interest rate advantages afforded by such an approach, the costs of water from the Cal-Am Project will be materially higher, and likely substantially in excess of the cost of water from the alternative projects. A significant contribution of public funds will avoid such an unwarranted expense to Cal-Am’s rate payers. 2. Cal-Am must agree to form the Governance Committee to provide publicly- accountable oversight of the project. 3. Cal-Am must diligently seek to secure lower electricity rates for the project (e.g., $0.08-$0.09 cents/kWh as most recently estimated by Cal-Am) that may be available for purchase through a municipal electrical utility, generation of on-site power if available, or from another source of low-cost power. 4. Cal-Am must agree to limit the use of revenue from Cal-Am’s Surcharge 2 to reduce financing risks of stranded costs to the Cal-Am ratepayers in the event the Cal-Am Project is not completed. For example, Cal-Am could agree only to use Surcharge 2 to fund lower risk parts and phases of the project (such as only the construction phase), apply Surcharge 2 revenue only for the construction of tangible assets that would be required irrespective of the desalination solution, or provide other mechanisms to reduce risks to the Cal-Am ratepayers. 5. To promptly address concerns pertaining to Cal-Am’s proposed intake wells, Cal-Am must: address all issues raised in the December 2012 testimony of Timothy Durbin; proceed with the planned test wells and any other advanced geotechnical work to support the proposed intake wells as soon as practically feasible; collaborate with local public agencies to advance permitting efforts with other responsible agencies, including the California Coastal Commission; and seek to clarify whether the installation of Cal-Am’s intake wells will require approval from any federal agency, which would, in turn, require compliance with the National Environmental Protection Act. 6. Cal-Am must continue to explore and advance alternative intake strategies as a contingency if Cal-Am’s proposed intake wells prove legally or technically infeasible. Cal-Am must fully develop a contingency plan or plans and implement that plan or those plans for source water that do not involve wells in the Salinas Basin. This must be done concurrently along with Cal-Am planning and testing of the proposed slant wells. 7. Cal-Am must show something in writing from the State demonstrating its ability to secure SRF financing. 8. Cal-Am must address questions about sea level rise and coastal erosion with respect to the placement and longevity of their proposed slant wells, as well as concerns pertaining to liquefaction from seismic events and potential damage from tsunami events. Together with the MPWMD and the County, MPRWA has met with Cal-Am on numerous occasions to seek Cal-Am’s agreement and commitment to address many of these conditions, notably with respect to the development of the Governance Committee Agreement SB 637640 v7:015621.0002 6 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 9, Packet Page 35 and discussions pertaining to the MPWMD/MPRWA proposal for a contribution of public funds to finance a portion of the Cal-Am project. These meetings have been productive thus far and the MPRWA intends to continue to meet with Cal-Am to address these conditions. Q15: Has the MPRWA formulated principles to guide a potential contribution of public funds to the Cal-Am project? A15: Yes, the MPWRA’s adopted principles for a contribution of public funds are as follows: 1. The public contribution lowers cost to ratepayers. The MPRWA recognizes that interest rates will change between now and the issuance of the Certificate of Public Convenience and Necessity (“CPCN”) and will change further between the CPCN and the need to issue debt or other financing. The MPRWA encourages the CPUC to require Cal-Am to accept a public contribution if and only if doing so lowers the net present value costs to ratepayers at the time of the financing. 2. The public contribution does not adversely effect other (non-Monterey area) Cal-Am ratepayers. The MPRWA recognizes it would not be fair policy if the structure of the public contribution benefited Monterey-area ratepayers but in some way had an adverse effect on other Cal-Am ratepayers (e.g., resulted in higher cost of capital for Cal-Am projects funded for other service areas). The MPRWA does not intend to structure a public contribution that would have this unintended effect and we encourage the CPUC to stipulate this also. 3. The public contribution need not require a Cal-Am-specific credit rating. American Water has a credit rating but it is our understanding that Cal-Am does not currently have a separate credit rating and they do not want to go through the process of getting one. The MPWRA does not object to this position and encourages the CPUC to stipulate that any public contribution be structured without needing a Cal-Am-specific credit rating. 4. The public contribution should not change Cal-Am’s authorized debt-to-equity ratio. MPRWA understands that Cal-Am is authorized a debt-to-equity ratio of 47% to 53%, as set in a separate PUC proceeding and, while we reserve the right to weigh in on that issue at a future point in the relevant venue/proceeding, we accept the ratio of 47% to 53% as given for the purposes of the current application. 5. The public contribution should not change Cal-Am’s authorized equity rate of return. MPRWA understands that Cal-Am’s authorized rate of return of up to 9.9% is set in a separate CPUC proceeding and, while we reserve the right to weigh in on that issue at a future point in the relevant venue/proceeding, we accept the rate of 9.9% as given for the purposes of the current application. 6. Cal-Am should be afforded the opportunity to invest some equity to garner its authorized rate of return to account for risk Cal-Am is taking. The MPRWA is not seeking to completely replace all Cal-Am equity with a public contribution because we recognize the CPUC's need to establish a stable, fair investment climate for SB 637640 v7:015621.0002 7 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 10, Packet Page 36 companies making investments in infrastructure in the state. The MPRWA accepts that Cal-Am will be taking on some risk with this project and that some equity investment is likely in the CPUC's policy interest, Cal-Am's interest, and in the interest of the Cal-Am ratepayers to make sure Cal-Am has a financial stake in the successful completion and operation of the Cal-Am Project. 7. The public contribution can not cause a material delay to the project. Given the CDO, we recognize the overarching need to avoid any project delay. Therefore, MPRWA’s believes the CPUC should only require Cal-Am to accept a public contribution if doing so does not delay the construction of the Cal-Am Project. Q16: What potential forms of a public contribution are the public agency's pursuing? A16: The Water Authority recommends that the PUC require CalAm to accept any form of public contribution of financing or other funds that meet the 6 principles outlined above. At this point we cannot provide an exhaustive list of all of the possible sources of public contribution that may become available during the construction of the desal project. For example, on February 21st 2013, I spoke with Assemblymember Mark Stone about the possibility of including public financing for the Monterey-area desal project in the possible state-wide water bond that the Governor is considering. Assemblymember Stone said that he is already working on this and will continue to push for language that will help provide water bond financing for projects that serve the Monterey area. We also believe there may be grant money available and want to ensure that Cal-Am is required to pursue and accept any such funds. Q17: If Cal-Am satisfies these conditions, would the MPRWA support the Cal-Am Project? A17: As indicated in the Position Statement, under the present state of knowledge, the MPRWA would support the Cal-Am Project if these conditions were satisfied by Cal-Am. Q18: Please explain the reasons for MPRWA’s conditional support for the Cal-Am Project if Cal-Am satisfies the conditions set forth in the Position Statement. A18: If Cal-Am meets the conditions set forth in the Position Statement, the MPRWA finds that there are several reasons under the present state of knowledge why the Cal-Am Project deserves support. First, the SPI Report explained that Cal-Am has progressed the furthest in the planning and design of its proposed project and environmental review for the project pursuant to the California Environmental Quality Act (“CEQA”) is well underway. As a result it is likely to be completed nearest to the deadline set forth in the CDO. By comparison the DWD project was SB 637640 v7:015621.0002 8 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 11, Packet Page 37 described as having nearly completed a project description and initial study under CEQA and the PML is described as at only a preliminary level of engineering and planning. Second, the proposed size of the Cal-Am Project is consistent with MPRWA’s position of focusing on water for “replacement and replenishment,” including lots of record and economic recovery. By comparison, the DWD project proposes a larger regional project, which may in turn result in greater permitting challenges. The Cal-Am Project also accommodates the policy desire to pursue a portfolio of projects to meet the needs of the Monterey Peninsula, thereby reducing the risk associated with any project failing or being delayed. Third, as discussed in the concurrently filed testimony of Kris Helm, to permit a desalination project in Monterey County, the California Coastal Commission and other responsible permitting agencies will likely require the least environmentally harmful feasible alternative for the source water intake. MPRWA believes that it is unlikely that an open water intake will be permitted unless options for subsurface intake are proven to be infeasible. Of the three projects, only the Cal-Am Project proposes to pursue subsurface intake. For this reason, the MPRWA believes there is substantial permitting risk associated with the intake method proposed by the other two projects until and unless subsurface intake is proven to be infeasible. Fourth, Cal-Am has demonstrated its ability to finance a project, and if the MPRWA’s financing conditions are accepted, the costs of the Cal-Am Project are likely to be competitive with the projected costs of the other proposed projects. The Cal-Am financing plan is comprised of four different sources of capital: short-term construction financing, the proposed Surcharge 2, State Revolving Funds (“SRF”), and Cal-Am equity. Neither of the other two project proposals have a detailed financing plan and neither would likely have access to short-term construction financing, Surcharge 2 or SRF, all of which are advantageous forms of financing. A principal condition for MPRWA support of the Cal-Am Project is Cal-Am’s acceptance of a significant public contribution of funds at a lower interest rate than Cal-Am’s blended equity/debt recovery rate as a fifth source of capital. Cal-Am’s acceptance of this condition would significantly lower the cost of the project. Cal-Am also has the capital necessary to complete the permitting of its project. Neither of the other projects have demonstrated this ability. Fifth, Cal-Am has also indicated the potential to secure electricity at $0.087 per kWh and could possibly purchase electricity at a lower rate through a municipal electrical utility formed by a local public agency. DWD’s proposed municipal electrical utility involves the City SB 637640 v7:015621.0002 9 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 12, Packet Page 38 of Salinas, and its success is therefore outside of the direct control of Cal-Am and the Monterey Peninsula stakeholders. Sixth, the DWD project involves a “complex” relationship of various entities, including a municipal electrical utility, a data center, the formation of a regional JPA, and a water purchase agreement with Cal-Am. MPRWA is not aware that any of these relationships have been established. This unresolved complexity leaves more room for possible delay or failure. Finally, the draft Governance Committee Agreement strikes the right balance of ensuring that the most important decisions are either made by public agencies or are fully informed by recommendations from public agencies. The Agreement avoids inserting the public agencies into decisions that the MPRWA has judged to be better made by a private entity. Q19: Have you discussed the MPRWA’s Position Statement with the California Coastal Commission with respect to desalination project permitting issues and are there conclusions from such discussion pertinent to the elements of the Position Statement? A19:  Yes, on February 21, 2013, and at the suggestion of Charles Lester, Executive  Director of the California Coastal Commission, I met with Dan Carl, Deputy Director for the  Central Coast District Office of the California Coastal Commission. I shared the MPRWA’s  Position Statement with Mr. Carl.  He explained that several elements of the Position  Statement accurately reflect the Coastal Commission’s position with respect to desalination  project permitting. First, he confirmed that permitting a project with a “defined service area  with a known level of build‐out” will involve an “easier” review while projects with an  “unknown or extensive service area” will involve a “more difficult” review. Second, he  confirmed that the Coastal Commission will require the least environmentally harmful  feasible alternative for a project’s source water intake.  As such, the Coastal Commission will  likely not permit an open water intake unless test slant wells have shown subsurface intake to  be infeasible.   V. Summary of Governance Committee Q20: Please describe the Governance Committee previously referenced in your testimony. A20: The MPRWA, the MPWMD, the County, and Cal-Am have developed a near-final agreement to form the Governance Committee (attached hereto as “MPRWA Exhibit 1” and SB 637640 v7:015621.0002 10 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 13, Packet Page 39 referred to hereafter as the “Agreement”). The MPRWA anticipates that the Agreement will be executed within the next week or so without significant changes from the draft Agreement attached to my testimony. The Governance Committee is being established to ensure efficient and effective public input, accountability, and transparency respecting the development and operation of the Cal-Am Project. Its purpose and function is to: (i) consult with, advise, and in some circumstances, provide direction, to Cal-Am concerning the design, permitting, construction, operations, maintenance, repairs, and replacements to the Desalination Project; and (ii) to serve as the entity which Cal-Am regularly updates as to Desalination Project’s status and related issues. Each of the public entity members of the Governance Committee shall have a single equal vote for the issuance of decisions or recommendations by the committee. Although a member of the committee, Cal-Am shall not have a vote with respect to the committee’s issuance of decisions or recommendations. The Agreement establishes three sets of topics for consideration, consultation, decision, or recommendation by the Governance Committee with varying processes for consultation, recommendations, and/or decision-making. Category A includes matters that were deemed appropriate for decision by the public agency parties. For example, included within Category A is the decision concerning whether to seek CPUC approval for a combination of desalination and groundwater replenishment or a larger desalination project without groundwater replenishment. So too are matters concerning the retention of a value engineer to provide value engineering for the project, project aesthetics, and pursuit of alternative power sources for the project. For these matters, Cal-Am is required to abide by the decision issued by the Governance Committee. Category B includes matters that were deemed appropriate for consultation and recommendation by the Committee, but for practical reasons, Cal-Am should be afforded ultimate discretion with respect to these matters. Examples include bidding documents, project contractors, and major change orders, among other topics. For these Category B matters, the Governance Committee may issue a recommendation, but Cal-Am may determine, at its sole discretion, whether or not to follow the Governance Committee’s recommendation, provided that if Cal-Am chooses not to follow the recommendation, it shall provide a written explanation of the reasons for its decision not to follow the recommendation. Finally, the topics in Category C were deemed generally of less importance than those in Category B. For these topics, the Governance Committee shall be consulted by Cal-Am and the committee may issue recommendations, but Cal-Am need not follow the committee’s SB 637640 v7:015621.0002 11 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 14, Packet Page 40 recommendation and need not provide a written explanation of its reasons for not following the recommendation should it chose not to do so. The placement of the matters into each of the aforementioned categories was carefully negotiated among the parties. The MPRWA believes the resulting compromise allows public decision-making as to essential matters that are appropriate for decision by the public agencies and affords public input and transparency as to the matters in Categories B and C, while avoiding unnecessary interference with Cal-Am’s development and operation of the project. Cal-Am’s entry into the Agreement is expressly conditioned upon its legal obligations to abide by the orders and decisions of the CPUC. Therefore, should the CPUC order Cal-Am not to participate in the Agreement, Cal-Am will be relieved of all obligations set forth in the Agreement and the Agreement may be terminated by Cal-Am upon order of the CPUC. The MPRWA urges the CPUC to expressly condone Cal-Am’s participation in the Governance Committee within any Certificate of Public Convenience and Necessity issued in this proceeding. VI. Community Support for MPRWA Position Q21: Has the MPRWA received significant community support for its Position Statement? A21: Yes, the Position Statement adopted by the MPRWA on January 31, 2013 has received broad community support. For example, I attended the Monterey County Board of Supervisors meeting on February 12, 2013. At this meeting, I presented MPRWA’s Position Statement to the County Board of Supervisors, who subsequently unanimously approved an order supporting the Position Statement, a copy of which is attached hereto as “MPRWA Exhibit 3.” On February 12, 2013 the MPWMD also adopted a position that is consistent with MPRWA’s Position Statement. Further, on February 8th, 2013, I spoke with Congressman Sam Farr, who represents the Monterey Peninsula. Congressman Farr expressed to me his support of MPRWA’s Position Statement, and subsequently sent a letter to me confirming his support. A copy of this letter is attached hereto as “MPRWA Exhibit 4.” On February 8 th and February 12th, 2013, I spoke with former State Assembly member and current Santa Cruz County Treasurer Fred Keeley. Mr. Keeley successfully sponsored legislation in 1998 (AB 1182) when he was the State Assemblyman for the Monterey Peninsula to require the CPUC to develop a viable alternative water supply project to the now defunct SB 637640 v7:015621.0002 12 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 15, Packet Page 41 Carmel River Dam proposal. Mr. Keeley expressed to me his support of MPRWA’s Position Statement, and subsequently sent a letter to me confirming his support. A copy of this letter is attached hereto as “MPRWA Exhibit 5.” On February 20 th , 2013, I spoke with John Narigi, the Vice President and General Manager of the Monterey Plaza Hotel & Spa and is a member of the Executive Committee of the Coalition of Peninsula Businesses Board of Directors. Members of the Coalition of Peninsula Businesses include the Monterey County Hospitality Association, the Monterey Peninsula Chamber of Commerce, Pacific Grove Chamber of Commerce, Carmel Chamber of Commerce, the Community Hospital of the Monterey Peninsula, the Monterey County Board of Realtors, the Monterey Commercial Property Association and the Monterey Peninsula Association of General Contractors. Mr. Narigi subsequently sent me an email confirming the Coalition of Peninsula Businesses’ support for MPRWA’s Position Statement. On February 19, 2012, I received a letter from Julie Packard, 2 Executive Director of the Monterey Bay Aquarium (“Aquarium”) expressing the Aquarium’s support for the MPRWA’s Position Statement. A copy of this letter is attached hereto as “MPRWA Exhibit 6.” Q22: Do you perceive significant implications from the community support for the MPRWA’s Position Statement? A:22 I believe that multiple prior efforts to develop replacement water supplies for the Monterey Peninsula, including the recently defunct Regional Desalination Project, failed in part because of disagreement as to the proposed solution among community stakeholder groups and the lack of unified leadership in support of a specific project that is technically and legally viable, cost-effective, and which affords meaningful public participation and oversight. From my extensive discussions with other elected officials and stakeholders, I believe this view is widely shared within the community. The MPRWA was created to provide a means to express a unified voice concerning proposed water supply projects among the jurisdictions that are directly accountable to the public to be served by the projects. I believe the broad community support expressed for the MPRWA’s Position Statement indicates that a consensus is emerging in support of the approach outlined in the Position Statement. I believe this consensus can be applied to obtain a successful project, but only if the conditions set forth in the Position Statement are satisfied. For this reason, I respectfully urge the CPUC to structure its Certificate 2 In the interest of disclosure, please note that Julie Packard is my aunt. SB 637640 v7:015621.0002 13 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 16, Packet Page 42 SB 637640 v7:015621.0002 14 of Public Convenience and Necessity issued in this proceeding consistent with the conditions set forth in the Position Statement. Q:23 Does this conclude your testimony? A23: Yes. MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 17, Packet Page 43 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA In the Matter of Application of California- American Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to Recover All Present and Future Costs in Rates A.12-04-019 (Filed April 23, 2012) DIRECT TESTIMONY OF ALEX WESNER RUSSELL M. MCGLOTHLIN (SBN 208826) RYAN C. DRAKE (SBN 262580) BROWNSTEIN HYATT FARBER SCHRECK, LLP 21 East Carrillo Street Santa Barbara, CA 93101 Telephone: (805) 963-7000 Facsimile: (805) 965-4333 Email: [email protected] Attorneys for: MONTEREY PENINSULA REGIONAL WATER AUTHORITY Dated: February 22, 2013 1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 18, Packet Page 44 2 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA In the Matter of Application of California- American Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to Recover All Present and Future Costs in Rates A.12-04-019 (Filed April 23, 2012) TABLE OF CONTENTS I. Introduction........................................................................................................................ 1 II. General Summary of Proposed Desalination Projects....................................................... 2 III. Summary of Evaluation Procedure .................................................................................... 5 IV. Comparison of Design and Capital Facilities .................................................................... 6 V. Assessment of Technical Challenges and Implementation Issues..................................... 9 VI. Assessment of Project Development Schedules .............................................................. 10 VII. Assessment of Project Costs ............................................................................................ 11 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 19, Packet Page 45 DIRECT TESTIMONY OF ALEX WESNER I. Introduction Q1: Please state your name and business address. A1: My name is Alex Wesner. My business address is 3156 Lionshead Avenue, Suite 2, Carlsbad, CA 92010. Q2: By whom are you employed and in what capacity? A2: I am employed by Separation Processes Inc. (“SPI”), and I serve as Vice President and as a Project Manager. Q3: What are your responsibilities with Separation Processes Inc.? A3: I manage engineering personnel on projects and directly perform engineering work. The work includes preliminary studies, pilot tests, preliminary design studies, detailed design and system specifications, cost estimating (capital and annual operation and maintenance costs), construction support services, commissioning assistance, and training services for operations and maintenance personnel. My work, and that of SPI, is primarily focused on membrane-based water treatment technologies—microfiltration, ultrafiltration, nanofiltration, and reverse osmosis (RO) for the treatment of surface water, wastewater, brackish groundwater, and seawater. Q4: Briefly describe your educational background. A4: I hold a Bachelor of Science in Chemical Engineering from the University of California at San Diego, and I am a Registered Professional Chemical Engineer in California. Q5: Please describe your professional experience. A5: I have over seventeen years of experience in the planning, design, construction, startup and operations of membrane treatment facilities. I have successfully managed the membrane process design of some of the most advanced water reclamation projects for supply of low and high pressure boiler feeds in refinery applications. I have managed six integrated membrane projects for the West Basin Municipal Water District in El Segundo, California as well as the East Bay Municipal Utilities District. I have managed drinking water projects for Irvine Ranch Water District, South Coast Water District and for the Chino Basin Desalting Agency. I have 1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 20, Packet Page 46 extensive experience in pilot testing and procurement of membrane equipment having assisted with the procurement of over 15 membrane treatment systems. I also have experience in a wide range of technologies and applications including membrane filtration, nanofiltration and reverse osmosis. I have worked with West Basin Municipal Water District on their proposed seawater desalination project, including master planning, pilot and demonstration test programs. I assisted the city of Sand City with its design-build request for proposals package for its desalter. Q6: Have you testified before the California Public Utilities Commission (“CPUC”)? A6: No. Q7: What is the purpose of your testimony? A7: SPI, in association with Kris Helm Consulting (KHC), performed engineering and consulting support to the Monterey Peninsula Regional Water Authority (MPWRA) to assist with the evaluation of three candidate desalination projects on the Monterey Peninsula. As a result of that consultation, SPI and KHC produced a report, titled “Evaluation of Seawater Desalination Projects,” a copy of which is attached hereto as “MPRWA Exhibit 7.” SPI and KHC issued its draft report on November 6, 2012, and a final report on December 19, 2012. Subsequently on January 17, 2013, SPI and KHC issued a January 2013 Update to the final report to address several changes among proponent projects and to report the results of additional sensitivity analyses of evaluated costs for some projects. The final report presents the results of our evaluation of the projects. The purpose of my testimony is to explain the report’s findings and conclusions. II. General Summary of Proposed Desalination Projects Q8: Please provide a general summary of the three proposed projects. A8: The three projects included in our evaluation were those proposed by California American Water (“Cal-Am”), DeepWater Desal, LLC (“DWD”), and The People’s Moss Landing Water Desal Project (“PML”). Information for our evaluation primarily included materials supplied to the MPRWA technical advisory committee (“TAC”) in response to their 58-item questionnaire in May of 2012, along with supplemental information requested by SPI 2 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 21, Packet Page 47 and KHC from each project proponent. Summary information for each proposed project from our January 2013 update to our final report is provided below. For Cal-Am: Project Name Monterey Peninsula Water Supply Project (“MPWSP”) Proponent(s) California American Water Location 46-acre site of vacant, disturbed land west of the Monterey Regional Water Pollution Control Agency (“MRWPCA”) Regional Treatment Plant (“RTP”). Purpose To supply the supplemental desal component of the Monterey Peninsula regional water supply Production Volume 5.4 mgd or 9.0 mgd Key Features Raw seawater supply through a series of up to eight sub-surface slant wells located on a vacant 376 acre parcel with roughly 7,000 feet of ocean shoreline. Raw water and pump to waste transmission through one of eight candidate alignments. Single-stage, dual media pressure filtration pretreatment. Partial second-pass RO desalination treatment with energy recovery. Final product has a proposed blend of 60:40 first pass:second pass product. Product stabilization with calcite, carbon dioxide, and sodium hydroxide. Disinfection with sodium hypochlorite and temporary UV. 2 x 1.0 MG product storage tanks, product distribution pumps, and 36-in diameter product pipeline to Cal-Am distribution system near Seaside. 24-in brine disposal pipeline to the existing RTP outfall. For DWD: Project Name DeepWater Desal Proponent(s) DeepWater Desal, LLC, Dynegy Moss Landing Power Plant, G3 Data Centers Location Moss Landing Power Plant 3 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 22, Packet Page 48 Purpose Phase 1 to supply the supplemental desal component of the Monterey Peninsula regional water supply; Phase 2 to supply northern customers Production Volume Phase 1: 4.9 mgd or 9.1 mgd Phase 2: 22.0 mgd Key Features Raw seawater supply through a new 48-in open intake extending into the Monterey Bay west of Moss Landing at a depth of roughly 65-ft. Raw water transmission through an existing right of way maintained by MLPP to an existing pump station at MLPP for transfer to the site. Proprietary warming system at MLPP which will increase the temperature of the raw water. Single-stage, dual media pressure filtration pretreatment. Single-pass RO desalination treatment with energy recovery. Product stabilization with calcite, carbon dioxide, and corrosion inhibitor. Disinfection with sodium hypochlorite. 2.5 MG product storage tank, product distribution pumps, and 30-in diameter product pipeline to Cal- Am distribution system. 36-in brine disposal pipeline to MLPP existing cooling water ocean discharge. For PML: Project Name The People’s Moss Landing Water Desal Project Proponent(s) DeSal America, LLC composed of Moss Landing Commercial Park, LLC; and Stanley and Patricia- Vance Lueck Location Moss Landing Commercial Park Purpose To supply supplemental the desal component of the Monterey Peninsula regional water supply This project is currently proposed as alternative to the Cal-Am MPWSP. Production Volume 4.8 mgd or 9.4 mgd Key Features Raw seawater supply through an existing intake system drawing from the Moss Landing Harbor. Single-stage, zeolite pressure filtration followed by ultrafiltration (UF) pretreatment. Single-pass RO desalination treatment with energy recovery. Product stabilization with calcite, carbon dioxide, 4 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 23, Packet Page 49 and sodium hydroxide. Disinfection unspecified, but presumed to be with sodium hypochlorite. Product storage in existing site tankage. New distribution pump station and 36-in diameter product pipeline to Cal-Am distribution system near Seaside. Brine disposal through existing 51-in (internal diameter) outfall. Q9: Please describe the state of design and planning of each of the proposed projects. A9: Overall, Cal-Am’s project was the most developed as evidenced by the background materials they provided, followed fairly closely by DWD. PML’s level of project development was more preliminary. Both Cal-Am and DWD had detailed project descriptions and equipment lists, including preliminary design criteria. Cal-Am had somewhat more detailed cost estimate information available than DWD, but both were itemized to a large degree. DWD moved their proposed site during the course of our evaluation, precipitating, in large measure, the need for the January 2013 update to the final report, while Cal-Am’s plans remained static and well defined for the duration. PML lacked a comparable level of information, neglecting to supply a detailed list of equipment for each plant capacity increment and providing only summary capital and operating cost estimates. PML also had less fully defined intake and outfall plans, and their overall treatment process was somewhat uncertain, to be defined later by a planned pilot test program. III. Summary of Evaluation Procedure Q10: What was the evaluation procedure used for your analysis? A10: We received copies of the proponents’ responses to the MPRWA’s 58-item questionnaire and relevant attachments. We reviewed these materials and generated a list of questions for each project proponent where additional project definition was required. Our scope of work required us to gain an understanding of each proposed project from a technical point of view in order to identify any substantive differences between them. We used the information gathered to make an assessment of technical issues and to develop independent estimates of anticipated capital and operating costs. 5 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 24, Packet Page 50 Q11: Please explain how the report compared the various projects elements. A11: The report organized and presented the findings of our evaluation pursuant to five main sections:  Project Summaries – This section included a summary of each project as proposed by each proponent.  Project Function – This section described, for each project, the proposed purpose,, intended customers, and the proposed feed water supply. This section also provided, for each project, an evaluation of the adequacy of the proposed treatment approach, an assessment of plans for residuals handling, an assessment of the overall quality of project information provided, and an identification of any fatal flaws of a technical nature.  Projected Performance – This section assessed the plant design capacity, targeted product water quality, and disinfection strategy for each project.  Economics – This section summarized our estimates of capital and operating costs for each project along with a comparison to estimates provided by the proponents.  Implementation Considerations – This section provided our assessment of the environmental and permitting considerations for each project along with projected schedules for implementation. IV. Comparison of Design and Capital Facilities Q12: Are there common design and capital facilities among the proposed projects? If yes, what are they? A12: Yes. Each project had feed, product and brine pipelines of varying lengths. Each project also contained some analogous treatment equipment, including chemical feed systems, media filters, cartridge filters, RO trains, calcite contactors, storage tanks, and pump stations. Q13: What are the principal differences in the design and capital facilities among the proposed projects? A13: Plant Capacity. In terms of plant capacity, each proponent proposed different rates of production which impacted their overall facilities. Cal-Am proposed capacities of 5.4 mgd and 9.0 mgd; DWD proposed capacities of 4.9 mgd, 9.1 mgd, and 22.0 mgd; and PML proposed capacities of 4.8 mgd and 9.4 mgd. 6 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 25, Packet Page 51 Facilities. In terms of facilities, both DWD and PML proposed sites which include existing intake and outfall facilities. Note that while DWD proposes a new seawater intake pipeline, it would be constructed by a third party and thus was not proposed as a direct part of DWD’s project. In comparison, Cal-Am would require construction of a complete new intake system (discussed further below), but use an existing outfall pipeline—though somewhat remote from their proposed plant site requiring an offsite connecting pipeline. The DWD and PML proposed sites are also developed, allowing the re-use of some existing structures and facilities; while Cal-Am’s proposed facility would be built on a green-field site. Treatment Process. In terms of treatment process, the raw water extracted by the proposed Cal-Am and DWD intakes would allow minimal pretreatment of dual media filtration; while the PML intake supply is likely to require media filtration in addition to UF pretreatment. For the proposed desalination facilities, all proponents proposed RO systems. However, both DWD and PML proposed single pass systems; while Cal-Am proposed a product supply composed of a blend of single pass RO and up to 40 percent second pass RO. For clarification--a second pass RO system treats product water from a first pass RO system. Further, Cal-Am and DWD proposed redundant (N+1) RO process trains, while PML did not propose redundant RO trains. Q14: How do the proposed projects differ with respect to their respective proposed methods and facilities for source water intake? A14: Cal-Am proposes to install a network of sub-surface slant wells drawing from a portion of the coast adjacent to the Salinas Valley Groundwater Basin. DWD proposes to use a new screened, open water intake installed at depth in Monterey Bay near Moss Landing. PML proposes to modify and upgrade and existing intake system drawing from the Moss Landing Harbor. Both the PML and DWD intakes would terminate on their proposed facility sites, while Cal-Am would require a roughly 4 mile pipeline from the well field to the plant site. Q15: How do the proposed projects differ with respect to their respective proposed methods and facilities for brine discharge? A15: Cal-Am would send brine to the existing MRWPCA ocean outfall for discharge along with the wastewater plant effluent. DWD would discharge brine to the existing cooling water discharge at Moss Landing Power Plant. PML proposes to use an existing 51-in diameter outfall 7 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 26, Packet Page 52 pipeline originating at its site and terminating in the Monterey Bay outside Moss Landing Harbor. Q16: Please explain the implications for the quality of the product water from each project as a result of the different desalination processes you noted in response to Question 13. A16: As noted, Cal-Am proposed a partial two pass RO system; while DWD and PML have proposed single pass systems. In terms of product quality, Cal-Am’s partial two pass system would target a chloride concentration of 60 mg/L; while the DWD and PML systems would produce product water with up to 131 mg/L chloride. Q17: For purposes of your analysis did you assume changes to the design or treatment procedures for any of the proposed projects to allow you to perform a level (i.e., “apples-to- apples”) comparison, and if so, what assumptions did you make? A17: Yes, in order to perform a cost analysis of each project on an equivalent basis, we made adjustments to the proponents’ facilities to achieve a balanced evaluation. The primary adjustments were in plant capacity and RO system design. The MPRWA requested that we evaluate each system at two production increments: 5,500 acre-ft/yr and 9,000 acre-ft/yr. Cal- Am proposed plant design capacities of 5.4 mgd and 9.0 mgd, which would produce the annual flow requirements if the facility operated on-line 98 percent of the time. Note that Cal-Am’s facility design includes the return of up to 8 percent of their facility product water to the Salinas Valley Groundwater Basin to account for the uptake of up to 3 percent of the raw water supply from the basin—making their actual annual production targets for the purposes of our evaluation 5,960 acre-ft/yr and 9,780 acre-ft/yr. We found that the 98 percent on-line factor could be achieved based on Cal-Am incorporating redundant rotating equipment and RO trains. Applying an equivalent basis, we adjusted the capacity of the DWD and PML systems for the purposes of our evaluation to 5.0 mgd and 8.2 mgd. Their capacities are smaller than Cal-Am as they do not have to return flow to the Salinas Valley Groundwater Basin. In terms of treatment facilities, we evaluated both DWD and PML as having a partial second pass RO system similar to Cal-Am. We also included redundant RO trains for PML to support the 98 percent on-line factor assumption used in determining their plant capacity for our evaluation. 8 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 27, Packet Page 53 V. Assessment of Technical Challenges and Implementation Issues Q19: In assessing the technical challenges and issues affecting each of the proposed projects, did you identify any fatal flaws for any of the projects that would render the project infeasible as proposed? A19: We found that there were no fatal flaws of a technical nature for any of the three projects apparent at their current stages of development. Q20: What do you perceive to be the principal technical challenges for each of the proposed projects? A20: Cal-Am’s principal technical challenge is in construction of its proposed slant wells— both a planned test well and the eventual wells for the full scale facility. Well construction activities are limited seasonally based on restrictions associated with the snowy plover; and must also account for erosion in the coastal zone. DWD’s principal technical challenge from our evaluation concerns the planned warming of its intake supply. DWD proposes to extract seawater at a depth of 61-ft and temperature of 10 °C. The raw water would be used to cool a proposed data center at the Moss Landing Power Plant site, and in the process, increase its temperature up to 26 °C. Both the nature of the proposed proprietary warming system and potential increase in biofouling of the RO process membranes due to the warming process are unknowns. PML’s principal challenges we see emanating from the proposed re-use of their existing intake and outfall facilities at the Moss Landing Commercial Park (previously the Kaiser Refractories Moss Landing Magnesia Plant). Modifications to the existing intake pump station are required and the quality of raw water extracted from the harbor is unknown. For the outfall, there is video evidence of decoupling in segments of the existing pipeline, excessive marine growth on the existing diffusers, and the entrance of sand into the pipeline. The overall magnitude of the damage is not well defined; nor are the requirements for repair, which could be significant and technically challenging. Q22: Did the state of engineering and planning for each project affect your assessment of the degree of certainty you applied to the technical issues and ultimately the costs of water from each of the projects? 9 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 28, Packet Page 54 A22: No. While there were differences is the states of development of each candidate project (see response to Question 9), none had advanced much beyond initial planning stages and our assessment of technical feasibility focused mainly on treatment and constructability issues. We feel the overall level of information gathered on each project was sufficient to perform an evaluation of technical issues. In terms of our cost analysis, we developed independent lists of equipment, received targeted quotations, and used our own seawater treatment system cost models to evaluate costs. We presented both our evaluated costs along with cost estimates developed by the project proponents in our report. VI. Assessment of Project Development Schedules Q23: On what information and findings did you base your assessment of the respective project schedules and likely pace of project development? A23: We reviewed schedule information included in the responses to the MPRWA questionnaire and received subsequent schedule clarifications from Cal-Am and DWD. PML neglected to update their schedule. Our scope (the SPI portion of the joint-report) required us to evaluate the proposed time to design and build the desalination plant facilities. For this, we used our experience with large design-build project delivery schedules and seawater desalination plant construction. Overall, we found broad parity between the design and construction schedules for the proposed facilities. The main schedule differentiator centered on permitting and environmental compliance. Q24: What are the primary issues that could delay the projected schedule for each of the projects? A24: From a design and construction perspective each project has attendant issues. Cal-Am is proposing a test slant well program to inform their intake system design. Our schedule shows some overlap between the test program and overall plant predesign; but we do not see much float. So a significant delay on the test well implementation could result in a delay in the overall project delivery schedule. For DWD, they have proposed a project integrated with a new data center at the Moss Landing Power Plant. They must also negotiate agreements with Dynegy to use existing buildings at the site for their desalination facilities and existing ocean outfall for brine disposal. 10 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 29, Packet Page 55 From our schedule, these agreements would need to be in place by August 2014 to not impact the overall project delivery schedule. For PML, they have proposed a year-long pilot study to validate their proposed treatment process train. While the major schedule drivers for PML relate to environmental and permitting issues, a significant delay in the pilot test program beyond September 2015 could affect their overall implementation schedule in our evaluation. Q25: What were your findings with respect to the schedule and likely pace of project development for each of the proposed projects? A25: We found that with sufficient planning (e.g., completion of prescribed tests and studies), each project could develop sufficient pre-design information to permit a design-built type project award in six months. We found that overall plant and related pipeline construction activities could be accomplished in eighteen months, followed by three months of commissioning and startup. In summary, we did not find significant differentiators among the projects in terms of their design and construction schedules. The differences in proponent schedules are primarily attributed to environmental and permitting issues, which were outside the SPI scope of work. Permitting issues addressed in our joint report were addressed by KHC. VII. Assessment of Project Costs Q26: How did you assess anticipated costs of water for each of the proposed projects? A26: To achieve a balanced evaluation of costs, we looked to establish the following:  Uniformity in plant design capacity.  Equivalency in treatment to achieve: a common RO feed water quality following pretreatment; a common treated water quality goal; and pathogen removal credits for the applicable supply source.  Uniformity in equipment redundancy.  Uniformity in unit cost criteria for common items.  Uniformity in cost factors applied to aggregated costs (e.g., contingencies, electrical and I&C costs, etc.).  Uniformity in unit costs for chemicals and other consumables (e.g., cartridge filter, RO membrane elements). 11 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 30, Packet Page 56 We adjusted the capacity of each proponent project to produce either 5,500 acre-ft/yr or 9,000 acre-ft/yr based on a 98 percent on-line factor. To meet a common product water quality goal, we evaluated each RO system as a partial two-pass resulting in a product blend of 40 percent second pass RO product and 60 percent first pass RO product. For pipelines, we estimated feed and brine pipeline lengths based on specific intake, outfall and site locations. For product water pipelines, we established a common tie-in location in the Cal-Am service area and estimated lengths from the individual proponent sites to that point. We sized equipment and process units according to the established plant flow criteria (at each annual delivery target) and developed estimates of capital facilities cost, applying the above criteria related to equipment redundancy, unit costs, and aggregated cost factors. For annual operations and maintenance expenses, we calculate energy and chemical costs based on our annual plant flow assumptions for the various proponents. For chemicals, we established unit costs for each and applied them uniformly across each project. For energy costs, we solicited the forecast cost of electricity from each proponent and confirmed them based on PG&E rate schedules. We assumed uniform annual equipment replacement costs as a percentage of evaluated equipment costs along with annual uniform operations and maintenance labor costs. We then added any additional proponent-related expense s for annual leases or proponent profits specific to a given project. To determine the cost of water produced, we amortized the capital cost estimates based on a specified interest rate and term for each proponent, and added that total to the annual operations and maintenance cost. This total annual cost figure for each annual production target was divided by the respective annual amount of water produced (e.g., either 5,500 acre-ft/yr or 9,000 acre-ft/yr) to determine a production cost of water in units of $/acre-ft. Overall, we gauged our cost estimates as Class 5 as defined by the Association for Advancement of Cost Engineering (AACE), having an accuracy range of -30 to +50 percent. The AACE defines Class 5 estimates as focused on conceptual screening of alternatives. In the context of our evaluation, we consider the costs useful for comparison of the various proponent projects among themselves, as the costs were developed on an equivalent basis. The overall level of project development and scope of our evaluation do not warrant the costs to be used on a standalone basis as a reliable indication of future construction and operating costs. Q27: Were there aspects of project costs that were more or less uniform among the proposed projects pursuant to your analysis, and if so what were they? 12 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 31, Packet Page 57 A27: As indicated above, operations and maintenance labor requirements were held uniform across the three projects. On the capital side, media filters, RO trains, cartridge filter, and calcite contactor costs were also fairly uniform, with differences only relating to capacity variation. Q28: Among the proposed projects, what project-specific factors were the primary factors resulting in differing water costs among the proposed projects? A28: On the capital side, Cal-Am had higher costs associated with its proposed intake wells then the other proponents. DWD essentially had no cost associated with its proposed new intake because it proposes for the intake to be constructed by a third-party without cost to the DWD desalination project; while PML had a nominal allowance associated with upgrades to its existing intake facilities. For PML, their treatment facilities cost were somewhat higher due to their proposed pretreatment system which included UF treatment in addition to media filtration. Overall, Cal-Am’s facility costs were also somewhat higher due to the need to treat excess flow and return a portion to the Salinas Valley Groundwater Basin. For operating costs, Cal-Am provided a higher electrical unit cost than either DWD or PML (roughly $0.13/kW-hr vs $0.08/kW-hr); leading to comparatively higher energy costs. Cal- Am’s increased design capacity also impacted operating costs somewhat. DWD had comparatively high facility leasing expense along with a required annual return (proponent profit). The final differentiator was in the assumed cost of financing/amortization for each project. DWD and PML were presumed to have access to public financing at an interest rate of 4.00 percent and for a term of 30 years. Cal-Am’s financing costs were calculated as an effective annual rate by Dave Stoldt, General Manager for the Monterey Peninsula Water Management District representing the average annual capital recovery over a 30-year period. The effective interest rate was found to be 8.49 percent—resulting in a comparatively higher capital amortization factor. Q29: What were the principal findings of your analysis with respect to the anticipated cost of water produced from each of the proposed projects? A29: For the 9,000 acre-ft/yr production scenario, we found Cal-Am to have a cost of production of $3,300/acre-ft; with a range based on accuracy estimate of $2,310 - $4,950/acre-ft. 13 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 32, Packet Page 58 14 DWD’s equivalent production cost and range were $2,100/acre-ft and $1,470 - $3,150/acre-ft. PML’s values were $2,320/acre-ft and $1,625 - $3,480/acre-ft. The same parameters for the 5,500 acre-ft/yr production scenario were as follows: Cal-Am: $4,310/acre-ft and $3,017 - $6,465/acre-ft DWD: $2,670/acre-ft and $1,870 - $4,005/acre-ft PML: $2,965/acre-ft and $2,075 - $4,450 Q30: In your January 2013 update to your report, you reported on a sensitivity analysis that you performed to estimate the reduced costs of water from the Cal-Am Project if Cal-Am were able to obtain a reduced rate for energy at an average rate of $0.087 per kWh. What were the results of this sensitivity analysis? A30: Base production cost for the 9,000 acre-ft/yr scenario would be $3,110/acre-ft with an accuracy range of $2,180 - $4,665/acre-ft. Comparable values at the 5,500 acre-ft/yr production scenario would be $4,120/acre-ft and a range of $2,885 - $6,180/acre-ft. Q31: After your January 2013 update was completed, did you perform further sensitivity analysis regarding the costs of water from the Cal-Am Project to project those costs if the Cal- Am Project were able to obtain energy at an average rate of $0.087 per kWh and was also able to obtain the same long-term interest rate for capital facility financing that you assumed for the other two proposed projects? A31: Yes, we performed this further sensitivity analysis at the MPRWA’s request. Q32: What were the results of this further sensitivity analysis? A32: Base production cost for the 9,000 acre-ft/yr scenario would be $2,310/acre-ft with an accuracy range of $1,615 - $3,465/acre-ft. Comparable values at the 5,500 acre-ft/yr production scenario would be $3,015/acre-ft and a range of $2,110 - $4,525/acre-ft. Q33: Does this conclude your testimony? A33: Yes. MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 33, Packet Page 59 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA In the Matter of Application of California- American Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to Recover All Present and Future Costs in Rates A.12-04-019 (Filed April 23, 2012) DIRECT TESTIMONY OF KRIS HELM RUSSELL M. MCGLOTHLIN (SBN 208826) RYAN C. DRAKE (SBN 262580) BROWNSTEIN HYATT FARBER SCHRECK, LLP 21 East Carrillo Street Santa Barbara, CA 93101 Telephone: (805) 963-7000 Facsimile: (805) 965-4333 Email: [email protected] Attorneys for: MONTEREY PENINSULA REGIONAL WATER AUTHORITY Dated: February 22, 2013 1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 34, Packet Page 60 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA In the Matter of Application of California- American Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to Recover All Present and Future Costs in Rates A.12-04-019 (Filed April 23, 2012) DIRECT TESTIMONY OF KRIS HELM Q1: Please state your name and business address. A1: My name is Kris Helm. My business address is 4218 Ben Avenue, Studio City, CA 91604. Q2: By whom are you employed and in what capacity? A2: I am the principal of Kris Helm Consulting (“KHC”). Q3: What are your responsibilities? A3: I am a senior Water Resources Consultant, advising on issues related to water operations, water recycling and desalination, and well as in policy development, economic and financial analyses, and strategic planning. Q4: Briefly describe your educational background. A4: I hold a Bachelor of Arts degree in Economics from the University of California, Berkeley, California, 1980. Q5: Please describe your professional experience. A5: I have over 30 years of experience in water resource issues. I worked ten years for the Metropolitan Water District of Southern California, serving as a Branch Manager within the Water Resources Division as a Groundwater Resources Specialist. I also previously served as the 2 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 35, Packet Page 61 Manager of Planning and Operations at the West Basin Municipal Water District from 1992- 1997. More recently, I have provided program management services to municipal clients and developed water resources solutions for large-scale power generation projects. Q6: Have you testified before the California Public Utilities Commission (CPUC)? A6: No Q7: What is the purpose of your testimony? A7: My consulting firm, KHC, performed consulting support to the Monterey Peninsula Regional Water Authority (“MPWRA”) to assist with the evaluation of three candidate desalination projects on the Monterey Peninsula. In this respect, we evaluated the anticipated government permitting requirements pertaining to the three proposed desalination projects. The results of my findings concerning permitting for the desalination projects were included in a report that KHC developed with Separation Processes Inc., titled, “Evaluation of Seawater Desalination Projects,” a copy of which is attached to the direct testimony of Alex Wesner filed by the MPWRA concurrently with my direct testimony. The purpose of my testimony is to explain the report’s findings and conclusions concerning permitting issues and challenges for the proposed desalination projects. Q8: What were the three proposed desalination projects for which you evaluated permitting issues for inclusion in the report? A8: The three proposed desalination projects included in our evaluation were those proposed by California American Water (“Cal-Am”), DeepWater Desal, LLC (“DWD”), and The People’s Moss Landing Water Desal Project (“PML”). Q9: What sources, materials, or personal knowledge did you rely upon in developing your analysis of the permitting issues for the proposed desalination projects? A9: I previously served as Program Management Advisor to the Los Angeles Department of Water and Power. In this capacity, I studied and evaluated permitting issues related to the development of an ocean desalination plant to be co-located at a power plant utilizing once- through cooling. I have reviewed the federal and state rules applicable to once-through cooling of power plants and the proceedings before the California Energy Commission related to 3 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 36, Packet Page 62 permitting new power plants utilizing once-through cooling including the adjudicative proceedings related to licensing once-through cooling at the Moss Landing Power Plant. I reviewed the State Water Resources Control Board policies on once-through cooling and the Moss Landing Power Plant plan to comply with those rules. I reviewed development of the Carlsbad, Huntington Beach, Dana Point and West Basin Municipal Water District proposed desalination plants. I was a peer reviewer on the Long Beach water department’s ocean- desalination demonstration project. I have kept abreast of the Coastal Commission’s stated position on permitting ocean desalination facilities and participated in review of the State handbook for planning ocean desalination projects. For this evaluation I reviewed numerous reports including reports cited in the joint report KHC developed with SPI. Those included the prior Environmental Impact Report (“EIR”) for the Coastal Desalination Project, the Superior Court’s order regarding deficiencies in the EIR, various sources regarding the National Marine Sanctuary’s policies for permitting projects within the Monterey Bay National Marine Sanctuary including the “Guidelines for Desalination Plants in the Monterey Bay National Marine Sanctuary.” I also reviewed numerous reports prepared by the developers of the three proposed projects. Q10: Briefly explain the approach you undertook in assessing the permitting issues for the proposed desalination projects. A10: Each of the projects was evaluated in terms of the major issues it faced for environmental compliance and permitting, and the consequences for the development schedule. The evaluation was performed at a very high level and based upon conceptual rules of thumb. In order to screen the issues of significance, the prior Coastal Water Project EIR was reviewed and largely relied upon to assess facts and mitigation strategies for environmental compliance. That document was presumed to have identified the relevant permits for prior project approaches. Based upon my judgment, the major differences between the three proposed projects and the alternatives described in the Coastal Water Project EIR were assessed to determine the major permits that would need to be obtained and the new environmental assessments that would be necessary. Each of the project sponsors provided estimates of the schedule for implementation including the estimated timing for environmental compliance and major permits. The conceptual schedule and schedule risk were reviewed with the project sponsors for comment in an effort to present consensus on the project schedule and risks. 4 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 37, Packet Page 63 Although the prior EIR identified more than 25 discretionary approvals which must be obtained for the project alternatives, our review focused on a simplified list of discretionary approvals based upon our judgment that these approvals would most likely dictate the critical path for project development.  Approvals related to Intake of Seawater  Approvals related to Project Discharge  Jurisdictional permitting for water of the US  Coastal Development Permitting Moreover, a highly simplified list of tasks for Environmental Compliance was created around these discretionary approvals. Those tasks in order are: 1. A project description must be completed. 2. An Environmental Assessment must be made. 3. An EIR/EIS must be completed. (CEQA/NEPA Compliance) 4. Commercial Agreements must be negotiated/ Cal Am must obtain a Certificate of Public Convenience and Necessity (After Certification of EIR) 5. Jurisdictional Permits must be obtained for facilities impacting waters of the U.S. 6. NPDES Permits must be amended/obtained 7. Coastal Development Permits must be obtained Q11: What did you conclude are the principal permits that must be obtained for each of the respective proposed projects that may materially affect project schedules ? A11: The principal permit that each of the projects will be required to obtain and which is likely to affect project schedules is a Coastal Development Permit from the California Coastal Commission. For the Cal-Am project, a Coastal Development Permit would be required both for its development of a test slant well and for the ultimate subsurface intake system. Each of the projects will also require a National Pollutant Discharge Elimination System (“NPDES”) permit issued by the Regional Water Quality Control Board. Finally, if a project involves the installation of infrastructure within the Monterey Bay National Marine Sanctuary (“MBNMS”), the project will need to obtain an Office of National Marines Sanctuaries permit from National Oceanic and Atmospheric Administration (“NOAA”). We conclude that the DWD and PML projects will both require permits from NOAA because they will involve construction of new intake and/or discharge facilities on the seabed of the Marine Sanctuary. The Cal Am project may also require a permit from NOAA if its intake gallery impacts the seafloor. 5 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 38, Packet Page 64 Q12: What did you conclude were the primary challenges concerning Coastal Development Permitting from the California Coastal Commission? A12: We concluded that to permit a desalination project in Monterey County, the California Coastal Commission will likely require the least environmentally harmful feasible alternative for the source water intake. Subsurface water intake is likely to be viewed by the Coastal Commission as the least environmentally harmful alternative, and therefore, we anticipate that the Coastal Commission will require that subsurface intake be fully explored for feasibility before considering proposals for permitting of an open water intake. In other words, we anticipate that the Coastal Commission will not permit an open water intake unless subsurface intake options are proven to be infeasible or environmentally less desirable than the proposed open-water intake. The Cal-Am Project proposes to pursue subsurface intake in order to avoid significant environmental impacts and comply with permitting policies. Q13: Did you conclude that any other responsible permitting agencies will also require demonstration of infeasibility of subsurface intake before considering permitting of an open water intake? A:13 Yes, we concluded that NOAA will also likely require demonstration of infeasibility of subsurface intake before considering permitting of an open water intake. Q14: On what information or source did you conclude that the Coastal Commission and NOAA will apply a policy preference for subsurface intake of source water? A14: Although there has not been formal rulemaking completed to provide rules for approval of new intakes for desalination projects, the California Department of Water Resources released an “Ocean Desalination Planning Handbook” in 2008. In pertinent part, this handbook provides guiding principles for permitting ocean desalination projects including the roles of various State agencies. We also reviewed statements regarding the evaluation of open water intakes in the NOAA policy guidelines for the MBNMS. These NOAA guidelines express a clear preference for subsurface intake, if feasible, over open water intakes. We also spoke with the director of water quality for the NMS. This information and applicable implications are summarized in a memorandum I issued to the MPWRA, titled “Permitting Concerns, Open Intake” on January 29, 2013, which is attached to my testimony as Exhibit MPRWA Exhibit 8. 6 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 39, Packet Page 65 Q15: Did your conclusion regarding the permitting challenges for open water intake affect your assessment of the schedules and likely pace of development for the respective proposed projects? A15: We concluded there is substantial permitting risk associated with the intake method proposed by the DWD and PML projects because both propose to use an open water intake. The DWD project proposes to use an open water ocean intake at a depth of 20 meters or more located off shore utilizing pipelines previously used for delivery of fuel oil to the Moss Landing Power Plant. The PML proposes to use an intake in the Moss Landing harbor presently permitted for the Moss Landing Commercial Project. 1 Neither, to my knowledge has proposed specific testing of subsurface intake methods as alternatives to open water intake. The Cal-Am project proposes to use a subsurface intake located at the Cemex property on the coast within the Salinas Valley. Cal-Am’s method of subsurface intake is proposed to either be slant wells or subsurface radial collectors, such as a Ranney well system. While Cal-Am’s proposed intake faces other potential challenges (e.g., allegations of potential harm to Salinas Valley Groundwater Basin users), from a permitting perspective, we concluded that the proposed subsurface intake proposal for the Cal- Am project affords that project a permitting advantage over the other two projects. Q16: Did you conclude that the necessary NPDES permitting presents any significant challenges for any of the proposed projects? A16: The PML project proposed a discharge reduction system which I could not review. They described a possible need to permit a new point of discharge. The DWD project proposed a method of disposal of waste products that the prior EIR found did not create a significant impact, as did the Cal-Am project. For purposes of our evaluation of scheduling, we assumed a period of time to obtain these permits prior to obtaining financing for project construction. We noted that there could be future challenges to the methods for mitigation of brine impacts approved in the prior EIR but assumed that the conclusions of the prior EIR were valid. 1 PML has proffered that, as a matter of law, the PML project’s use of seawater from the Moss Landing Harbor should be compared to the 60 MGD use that is permitted for the Moss Landing Commercial Park, and that because the PML project would not increase the permitted use of seawater, PML argues the PML project would not increase the take of water from the marine environment. We were not certain that this position is accurate and instead assumed that the PML’s take of seawater from the harbor would be compared to a no-project alternative, and therefore the impingement and entrainment impacts on marine life from the harbor intake would need to be fully evaluated in federal and state permitting processes and associated environmental review. 7 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 40, Packet Page 66 Q17: Did you conclude that there were other significant permitting challenges for any of the three proposed projects? A17: Yes, however as noted in the approach above, although the prior EIR identified more than 25 permits, including permits regarding potential take of endangered species, we assumed that the schedules proposed by the applicants had considered these permits and that the mitigation plans proposed were sufficient to obtain those permits. Our review focused on the way in which the projects would interface with the marine environment. We believed that these impacts and their effects on required permits would be the primary determinants of project schedule. For the Cal-Am project, we concluded that it was uncertain whether the project will require a permit from NOAA (and associated NEPA compliance) for Cal-Am’s intake infrastructure. This issue will likely ultimately depend on whether Cal-Am’s intake infrastructure impacts the seafloor. We also noted that the test well program could alter the design of the intake system and potentially require a reassessment of impacts and permitting for the intake system. We also noted that plans should be developed for a program that would “protect and enhance the marine environment” (a requirement of Coastal Commission review for the Coastal Development Permitting) rather than simply mitigate the impacts from proposed intake of seawater and disposal of waste brine to the marine sanctuary to a level of insignificance. Q18: Did you recommend any course of action for the MPRWA to facilitate resolution of the permitting challenges? A18: Yes, we recommended that the MPRWA work with CPUC to dovetail the administrative process for the issuance of a CPCN with the environmental review and permitting process for the project including administrative hearings by the California Coastal Commission. We recommended that the MPWRA meet with the CPUC to request concurrent review of the project by the California Coastal Commission. We urged this “dual-track” approach so that the Cal-Am project will be further along in the Coastal Development Permitting process when the CPUC issues a Certificate of Public Convenience and Necessity (“CPCN”) for the project. The Coastal Commission has a different standard of review and different concerns than would be addressed by the CPUC in its CEQA review or in a CPCN. Thus, engaging the Coastal Commission early to begin addressing these concerns is one of the most important ways (perhaps the single most effective way) to accelerate ultimate delivery of the project. Finally, noting the Coastal 8 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 41, Packet Page 67 9 Commission’s concerns regarding ongoing public oversight and stewardship over coastal resources and the marine environment, we urged the MPRWA to work with Cal-Am and the CPUC to ensure that appropriate public agency oversight and stewardship over the desalination project would be in place. We also recommended that MPRWA coordinate with CPUC to seek a determination from NOAA as to whether Cal-Am is likely to require a permit from NOAA as a result of potential seafloor alteration as part of its source water intake infrastructure. If so, Cal-Am should immediately begin processing an application with NOAA for this permit together with the development of an Environmental Impact Statement under NEPA so to avoid future project delay. Q19: Does this conclude your testimony? A19: Yes. MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 42, Packet Page 68 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA In the Matter of Application of California- American Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to Recover All Present and Future Costs in Rates A.12-04-019 (Filed April 23, 2012) EXHIBITS TO DIRECT TESTIMONY OF JASON BURNETT, ALEX WESNER AND KRIS HELM RUSSELL M. MCGLOTHLIN (SBN 208826) RYAN C. DRAKE (SBN 262580) BROWNSTEIN HYATT FARBER SCHRECK, LLP 21 East Carrillo Street Santa Barbara, CA 93101 Telephone: (805) 963-7000 Facsimile: (805) 965-4333 Email: [email protected] Attorneys for: MONTEREY PENINSULA REGIONAL WATER AUTHORITY Dated: February 22, 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 43, Packet Page 69 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA In the Matter of Application of California- American Water Company (U210W) for Approval of the Monterey Peninsula Water Supply Project and Authorization to Recover All Present and Future Costs in Rates A.12-04-019 (Filed April 23, 2012) EXHIBITS TO DIRECT TESTIMONY OF JASON BURNETT, ALEX WESNER AND KRIS HELM LIST OF EXHIBITS Burnett Testimony MPRWA Exhibit 1: Draft Agreement to Form the Monterey Peninsula Water Supply Project Governance Committee. MPRWA Exhibit 2: MPRWA Position Statement, Adopted January 31, 2013. MPRWA Exhibit 3: Order of the Monterey County Board of Supervisors, Adopted February 21, 2013. MPRWA Exhibit 4: Letter from Congressman Sam Farr, February 22, 2013, in support of MPRWA's Position Statement. MPRWA Exhibit 5: Letter from Fred Keeley, February 20, 2013, in support of MPRWA's Position Statement. MPRWA Exhibit 6: Letter from Julia Packard, February 19, 2013, in support of MPRWA's Position Statement. Wesner Testimony MPRWA Exhibit 7: Evaluation of Seawater Desalination Projects, Final Report, Update January 2013. Helm Testimony MPRWA Exhibit 8: Memorandum titled “Permitting Concerns, Open Intake,” from Kris Helm to MPRWA, January 29, 2013. MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 44, Packet Page 70 EXH M I P WA MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 45, Packet Page 71 DRAFT February 21, 2013 — Subject to Revision AGREEMENT TO FORM THE MONTEREY PENINSULA WATER SUPPLY PROJECT GOVERNANCE COMMITTEE This AGREEMENT TO FORM THE MONTEREY PENINSULA WATER SUPPLY PROJECT GOVERNANCE COMMITTEE ("Agreement") is made and entered into as of February , 2013, by and among the MONTEREY PENINSULA REGIONAL WATER AUTHORITY (IVIPRWA"), the MONTEREY PENINSULA WATER MANAGEMENT DISTRICT ("MPWMD"), the COUNTY OF MONTEREY ("County"), and the CALIFORNIA-AMERICAN WATER COMPANY ("Cal-Am"). The MP RWA, the MP WMD, the County, and Cal-Amare sometimes referred to individually herein as a "P arty," and collectively as the "P arties." I . Formation of Governance Committee P ursuant to the terms of this Agreement, the P arties hereby formthe Monterey P eninsula Water Supply P roject Governance Committee ("Governance Committee") comprised of representatives of the MP RWA, the MP WMD, the County, and Cal-Amto ensure efficient and effective public input into the development and operation of the Monterey P eninsula Water Supply P roject ("Project"). Cal-Am's entry into this Agreement is expressly conditioned upon its legal obligations to abide by the orders and decisions of the California P ublic Utilities Commission ("CPUC"). Therefore, should the CP UCorder Cal- Amnot to participate in this Agreement, Cal-Amshall be relieved of all obligations set forth in this Agreement and this Agreement may be terminated by Cal-Amupon such CP UCorder. Further, if the CP UCissues any order or decision that conflicts with any particular provision of this Agreement, Cal-Am shall be relieved of any and all obligations to abide by the conflicting provision of this Agreement. Definitions A. Application A.12-04-019. Application of California-American Water Company (U210W) for Approval of the Monterey P eninsula Water Supply P roject and Authorization to Recover All P resent and Future Costs in Rates, filed with the CP UCon or about April 23, 2012. B. ASR I nfrastructure. The facilities used to inject into and extract potable water fromthe Seaside Groundwater Basin, as described in Application A.12-04-019. These facilities will include the Aquifer Storage and Recovery (ASR") wells and related appurtenances, the backflush pipeline, the recirculation pipeline and the ASR pipeline. C. Brine Discharge I nfrastructure. Facilities located outside the desalination plant site that are used to dispose of brine into the ocean. These facilities will include the brine disposal pipeline, the brine receiving station, any modification to the MRWP CA existing outfall, or a new outfall, or potentially the use of other existing outfalls with or without modifications. D. Cal-AmNotification. The written notification fromCal-Amto the Chair of the Governance Committee that a matter is ready for consideration, consultation, or action by the Governance Committee as provided herein, and as further defined within Section V.B. E. CEQA. The California Environmental Quality Act. F. Contracts. One or more of the contracts between Cal-Amand a selected contractor, valued in excess of $1 million, relating to the design and/or construction of the following facilities: (1) the Desalination I nfrastructure, (2) the Source Water I nfrastructure, (3) the Brine Discharge I nfrastructure contracted for by Cal-Am, (4) the P roduct Water P ipeline, (5) the Raw Water P ipeline; (6) the ASR I nfrastructure, and (7) the Terminal Reservoir I nfrastructure. Contracts for one or more of the facilities identified above in this definition may be combined into a single contract. I n addition, the design and construction of a single facility identified above in this definition may be combined into a single contract. 1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 46, Packet Page 72 DRAFT February 21, 2013 — Subject to Revision G. CP CN. The Certificate of P ublic Convenience and Necessity, if ordered by the CP UC, within Application A.12-04-019. H. Desalination I nfrastructure. Facilities located within the desalination plant site that are used to create potable water fromeither an ocean source water, brackish source water or a combination thereof, and appurtenant facilities needed to dispose of brine to the Brine Discharge I nfrastructure, dispose of wastewater (i.e. process water and sanitary discharge), and any needed facilities that may be required to prevent export of native Salinas River Groundwater Basin water. I . Desalination P roject. The combination of the Desalination I nfrastructure, the Brine Discharge I nfrastructure, the Source Water I nfrastructure, the P roduct Water P ipeline, the Raw Water P ipeline, and the Terminal Reservoir I nfrastructure. J. GWR P roject. Groundwater replenishment project to be implemented by I VI RWP CA and/or MP WMD which involves advanced treatment of wastewater and the injection of product replenishment water into the Seaside Groundwater Basin. This project includes facilities for the treatment, conveyance, and injection of the product replenishment water. K. MRWP CA. The Monterey Regional Water P ollution Control Agency. L. P roduct Water P ipeline. Facilities used to convey potable water fromthe Desalination I nfrastructure to the Terminal Reservoir I nfrastructure and to Cal-Am's existing distribution systemat the Eardley P ump Station. M. P roject. The Monterey P eninsula Water Supply P roject as proposed in Application A.12-04-019, and as it may be modified by the CP CNissued in response to that Application. N. P ublic Entity Members of the Governance Committee. The MP RWA, the I VI P WMD, and the County. Cal-Amis not a P ublic Entity Member of the Governance Committee. 0. Raw Water P ipeline. Facilities used to convey feedwater (i.e., raw water) fromthe Source Water I nfrastructure to the Desalination I nfrastructure. P . Source Water I nfrastructure. Wells and appurtenant facilities (or alternative contingent intake facilities) that are used to extract and convey feedwater (i.e., raw water) to the Raw Water P ipeline. These facilities will include the slant intake wells and related appurtenances (if permitted) as well as alternate contingent intakes such as a Ranney Well or open ocean intake as submitted by Cal-Amin its contingency plans. Q. Terminal Reservoir I nfrastructure. Facilities used to pump and store potable water in storage tanks east of the City of Seaside along General JimMoore Boulevard. These facilities will include the terminal reservoir, terminal reservoir pump station, overflow facilities and related appurtenance needed to assist in the moving of water to and fromthe ASR I nfrastructure, other ASR facilities, and P roduct Water P ipeline. R. Value Engineer. The professional engineer(s) to be retained by, or to consult with, Cal- Amto performa value engineering analysis for the Desalination P roject to potentially lower the costs of, or maximize the value of, the Desalination P roject to Cal-Am's ratepayers, including matters concerning the cost effectiveness, performance, reliability, quality, safety, durability, effectiveness, or other desirable characteristics of the Desalination P roject. The P arties acknowledge that the P roject is still under development and several aspects of the P roject may be modified as planning continues and as may be ordered by the CP UC. I f necessary to address future modifications to the P roject, the P arties agree to cooperate in good faith to reach agreement to amend the definitions set forth herein as necessary to fulfill the purpose of this Agreement. 2 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 47, Packet Page 73 DRAFT February 21, 2013 — Subject to Revision Membership and Voting Each of the P ublic Entity Members of the Governance Committee shall be represented on the Governance Committee by one elected official of such entity and one alternate who shall also be an elected official. No individual person may be appointed as the primary or alternate representative of more than one P arty. I f MP RWA ceases to exists, then the cities that are members of the MP RWA at the time of the MP RWA's termination shall collectively choose a "city representative" that will take the place of the fVI P RWA representative on the Governance Committee. Cal Amshall be represented by the P resident of Cal-Amor the P resident's alternate, whomthe P resident may designate to act on his or her behalf at anytime. The Governance Committee shall appoint a "Chair" and "Vice-Chair" fromthe primary (non- alternate) elected officials appointed to the Governance Committee. Each of the P ublic Entity Members of the Governance Committee shall have a single equal vote in decision-making. Cal-Amshall not have a vote for purposes of the issuance of decisions or recommendations by the Governance Committee. However, Cal-Amshall, unless it abstains fromdoing so, state its preference with respect to any decision or recommendation made by the Governance Committee (the "Cal-Am Preference") at the time that any decision or recommendation is made by the Governance Committee and the Cal-AmP reference shall be recorded within the meeting minutes together with a summary of any explanation provided by Cal-Amfor the Cal-AmP reference. I V. Powers A. P urpose. The purpose and function of the Governance Committee shall be to: (i) consult with, advise and, in some circumstances, provide direction to, Cal-Amconcerning the design, permitting, construction, operations, maintenance, repairs, and replacements of the components of the Desalination P roject; and (ii) serve as the entity which Cal-Amregularly updates as to Desalination P roject status and issues. The members of the Governance Committee shall diligently consider all matters and cause the Governance Committee to timely and promptly issue decisions or recommendations brought before it as provided pursuant to the terms of this Agreement. B. Waiver of Action. Upon motion and affirmative vote of the Governance Committee (pursuant to Section VI I of this Agreement), the Governance Committee may choose to waive its right to issue a decision or recommendation with respect to any matter for which the Governance Committee is afforded such right herein. The purpose of the Governance Committee's right to waive its right to make any specified decision or recommendation herein is to empower the Governance Committee to avoid issuing any decision or recommendation, which, in its determination, would violate any law, unreasonably delay efforts to develop water supplies for the Monterey P eninsula, or otherwise compromise the public interest. V. Governance Committee Action; Procedures A. Matters Subject to Governance Committee Action. Matters for consideration, consultation, decision, or recommendation by the Governance Committee shall be divided among three categories, with varying processes for consultation, recommendations, and/or decision-making, as follows: Category A: The Governance Committee makes the decision or recommendation respecting the matter after receipt of a written recommendation fromCal-Am, and upon issuance of its decision or recommendation, the Governance Committee provides a written explanation of the reasons for its decision to Cal-Amwithin seven (7) calendar days following its decision or recommendation. Thereafter, Cal-Amwill comply with the decision or recommendation issued by the Governance Committee so long as the decision or recommendation is consistent with the terms of this Agreement. However, notwithstanding any provision of this Agreement, for any matter covered by Category A that relates to an action which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, as defined by section 21065 of the California P ublic Resources Code, no decision or recommendation shall be made by the Governance Committee as to the subject matter unless 3 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 48, Packet Page 74 DRAFT February 21, 2013 — Subject to Revision and until such time as the action has been subject to review by an appropriate agency in accordance with CEQA. The foregoing provision shall not be construed as an agreement or determination by or among any of the P arties that CEQA applies to any action of the Governance Committee. This Agreement is itself not a "project" as defined by section 16378 of the CEQA Guidelines (California Code of Regulations, Title 14, Chapter 3) because it is an organizational activity that will not result in direct or indirect physical changes in the environment and this Agreement makes no commitment to any project. Category B: The Governance Committee makes a recommendation respecting the matter after receipt of a written recommendation fromCal-Am. However, Cal-Ammay determine, at its sole discretion, whether or not to follow the Governance Committee's recommendation, provided that if Cal-Amchooses not to follow the recommendation, Cal-Amshall provide a written explanation of Cal-Am's reasons for its decision not to follow the recommendation within ten (10) calendar days following the issuance of the Governance Committee's recommendation. Further, should Cal-Amchoose not to follow the recommendation of the Governance Committee, then any P arty may raise the issue for review by the CP UCduring Cal-Am's next general rate case. Category C: Cal-Ammakes the decision respecting the matter after receiving a recommendation fromthe Governance Committee. Cal-Amneed not issue a written explanation for its decision, although should Cal-Amchoose not to follow the recommendation of the Governance Committee, then any P arty may raise the issue for review by the CP UCduring Cal- Am's next general rate case. B. P rocedure for Cal-AmNotification. Whenever Cal-Amis presented with, or becomes aware of, a matter that falls within any of the subjects identified herein for consideration, consultation, decision or recommendation by the Governance Committee that is ripe for presentation to the Governance Committee, Cal-Amshall, in writing, promptly notify the Chair of the Governance Committee ("Cal-AmNotification"), who shall schedule the matter for consideration by the Governance Committee. For purposes of this Agreement, a matter shall be deemed ripe for presentation to the Governance Committee at such time as either specified within the matters set forth below, or for any matter for which no specification is provided, Cal-Amshall determine the time(s) at which the matter is appropriate for presentation for consultation, decision, or recommendation by the Governance Committee consistent with the purpose of this Agreement. Unless a different period is specified herein, for all matters for which a decision or recommendation is to be made by the Governance Committee, the Governance Committee shall issue its decision or recommendation within ten (10) calendar days following receipt of the Cal-Am Notification. I f the P ublic Entity Members of the Governance Committee determine that the Governance Committee requires more than the prescribed time period provided for in this Agreement to act on any matter that is the subject of the Cal-AmNotification, the Chair of the Governance Committee may, within seven (7) calendar days following receipt of the Cal-AmNotification, request a reasonable extension of time by written request to Cal-Am, and Cal-Amand the P ublic Entity Members of the Governance Committee shall cooperate in good faith to agree upon and set a reasonable alternative deadline for action on the subject matter to the extent that such, an extension would not unreasonably delay the P roject, not unreasonably delay required CP UCfilings by Cal-Am, or otherwise compromise the public interest. So as to avoid undue delay, if the Governance Committee fails to make any decision or provide any recommendation upon any matter brought before it (including all Category A decisions) on or before the expiration of the prescribed period for action by the Governance Committee (or the period of any extension agreed to by Cal-Am), or if the Governance Committee affirmatively waives its right to make a decision or recommendation respecting a matter before it, then Cal-Ammay make the subject decision without a decision or recommendation, as applicable, by the Governance Committee. C. Cal-AmStatus P resentations and Governance Committee Recommendations Thereon. At each meeting of the Governance Committee, Cal-Amshall provide a report as to the status of the P roject, which shall be presented by one or more individuals knowledgeable about the material aspects of the P roject. Upon reasonable advance written notice, the Governance Committee may request that Cal-Aminclude within its status presentation to the Governance Committee the status of any matter that is set forth in any of the three categories for decision, recommendation, or consultation established 4 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 49, Packet Page 75 DRAFT February 21, 2013 — Subject to Revision below, together with an explanation of any pending or soon-to-be-pending decisions or options concerning the subject matter. The Governance Committee may issue, in writing, any recommendation concerning a subject matter included within Cal-Am's presentation. Cal-Ammay determine, at its sole discretion, whether or not to follow the recommendation, provided that if Cal-Amchooses not to follow the recommendation and the subject matter is a matter covered by either Category A or Category B, Cal-Am shall, within ten (10) calendar days following issuance of the Governance Committee's recommendation, provide a written explanation of the reason(s) for Cal-Am's decision not to follow the recommendation. I f the subject matter is a matter covered by Category Cor is not set forth within any of the three categories set forth below, Cal-Amneed not issue a written explanation of Cal-Am's reasons for its decision not to follow the recommendation. D. Categories for Matters Subject to Governance Committee Action. Matters for consideration, consultation, decision, or recommendation by the Governance Committee shall be divided among the following three categories as follows: Category A 1. This matter concerns the "GWR Recommendation," which specifically is whether Cal-Amshall: (i) pursue a water purchase agreement, acceptable to Cal-Am, for the purchase of water fromthe GWR P roject, and consequently Cal-Amshall develop smaller Desalination I nfrastructure with a capacity of approximately 6.4 MGD (or as specified in the CP CN); or (ii) forgo the pursuit of a water purchase agreement for the GWR P roject, and consequently Cal-Amshall develop larger Desalination I nfrastructure with a capacity of approximately 9.6 MGD (or as specified in the CP CN). I f the GWR Recommendation becomes ripe for recommendation, as specified in the paragraph below, before a CP CNis issued upon Application A.12-04-019, the Governance Committee shall not issue any binding recommendation concerning the GWR Recommendation. I f the GWR Recommendation becomes ripe for recommendation, as specified in the paragraph below, after a CP CNis issued upon Application A.12-04- 019, the Governance Committee shall decide whether to recommend that Cal-Ampursue the GWR P roject or riot (as set forth above), which recommendation shall then be subject to CP UCapproval or rejection pursuant to the procedure specified herein. The Governance Committee shall make this recommendation based upon criteria to be mutually-agreed to by the P arties, negotiating in good-faith, after the execution of this Agreement. The GWR Recommendation shall become ripe for a recommendation to be made by the Governance Committee (i) no earlier than the date Cal-Amaccepts the 30%Design fromthe contractor retained for the design of the Desalination I nfrastructure, (ii) no later than that date upon which Cal-Amis prepared to issue a notice to proceed to a contractor to commence construction of the Desalination I nfrastructure, (iii) after the CEQA lead agency has certified the environmental impact report for the GWR P roject and approved the GWR P roject, and (iv) while there is sufficient time for the GWR Recommendation to be made and for the CP UCto review and approve that recommendation, without otherwise delaying the P roject. The GWR Recommendation shall be made by the Governance Committee, in writing with an explanation of the reasons for its decision, within sixty (60) days following receipt of the Cal-AmNotification concerning this matter. The recommendation issued by the Governance Committee shall be submitted by Cal-Amto the CP UCfor approval or rejection pursuant to a Tier 2 Advice Letter (or at the direction of the CP UC, an alternate formof submission) within ten (10) calendar days following issuance of the GWR Recommendation by the Governance Committee for the CP UC's review and approval. To avoid undue delay of the P roject, and notwithstanding the ripeness of the GWR Recommendation as described above, if on the date that is ninety (90) days prior to the date upon which Cal-Amanticipates being prepared to issue a notice to proceed to a contractor to commence construction of the Desalination I nfrastructure, no public agency has issued a resolution or order that declares that it is prepared to issue a notice to proceed to a contractor to commence construction of the GWR P roject, then Cal-Ammay make the decision with respect to the GWR Recommendation, in its sole discretion, without soliciting or obtaining the GWR Recommendation fromthe Governance Committee. 2. The Governance Committee shall select a Value Engineer(s) to facilitate and report on the proposed value engineering for the Desalination P roject, with consideration given to any 5 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 50, Packet Page 76 DRAFT February 21, 2013 — Subject to Revision recommended engineer submitted by any member of the Governance Committee. Cal-Amshall conduct the procurement for the Value Engineer and, consistent with the processes set forth in Categories B(1), B(2) and C(2) relating to Contracts, seek recommendations fromthe Governance Committee for the contract between Cal-Amand the Value Engineer. After reviewing the results of the procurement process, the Governance Committee shall decide which engineer is to be retained by Cal-Amas the Value Engineer for the Desalination P roject. This matter shall be ripe for decision before Cal-Amaccepts the 30%Design fromthe contractor retained for the design of the Desalination I nfrastructure, or at any other time that Cal-Amintends to retain a Value Engineer for any other infrastructure constructed as a component of the Desalination P roject. 3. Subsequent to the issuance of the CP CNand subsequent to the selection of any design-build contractor(s) for the Desalination I nfrastructure, the Governance Committee may issue decisions concerning architectural renderings for the Desalination P roject. The Governance Committee shall be presented with architectural renderings for decisions regarding the same when such architectural renderings are complete and upon any subsequent modifications thereto. The Governance Committee may also, in its discretion, appoint a representative to consult with Cal-Amregarding other external features or aesthetics of the Desalination P roject. Upon a determination of the Governance Committee or its representative, the Governance Committee's representative and Cal-Amshall present to the Governance Committee options pertaining to the Desalination P roject's external feature or aesthetics, upon which the Governance Committee may decide which option to pursue. Notwithstanding any provision of this paragraph, the Governance Committee may not issue a binding decision concerning the Desalination I nfrastructure's architectural renderings, or the Desalination P roject's external features 1 or aesthetics, if the decision would in the opinion of the design-build contractor, increase the capital or operational cost of the Desalination I nfrastructure. 4. Subsequent to the issuance of the CP CN, the Governance Committee may issue decisions concerning procurement of alternative (non-P acific Gas &Electric) energy supplies for the Desalination I nfrastructure, including but not limited to waste-to-energy, so long as such decisions result in lowering the Desalination I nfrastructure's estimated unit price for power. This matter shall be ripe for decision at any time a formal written proposal concerning alternative power is presented by one or more of the P arties for consideration. Category B 1. P rior to the issuance of a request for qualifications, request for proposals, or request for bids, as applicable, relating to the procurement of a Contract, the Governance Committee may recommend qualifications and selection criteria for such Contract. 2. P rior to the execution of any Contract not executed on or before the date that is thirty (30) calendar days after the effective date of this Agreement, and upon presentation and recommendation by Cal-Amto the Governance Committee after Cal-Amhas reviewed and evaluated proposals or bids, as applicable, and negotiated with the contractor a Contract that, in the opinion of Cal- Am, is ready for execution by and between Cal-Amand the contractor, the Governance Committee may recommend which contractor should be retained under the Contract, and issue any recommendations concerning the terms of the final Contract. When presenting a Contract to the Governance Committee for its consideration and recommendation, Cal-Amshall provide to the Governance Committee a copy of all responsive proposals or bids received for the pertinent work, except for any proprietary information provided by contractors submitting responsive proposals or bids, together with a written description of the process Cal-Amundertook to select a recommended Contractor, a summary of the considerations that Cal-Amdeems pertinent to support its recommendation, and any other information that Cal-Ambelieves will assist the Governance Committee in its review of the recommended Contract and contractor. 3. The Governance Committee may review and issue recommendations concerning major changes to the Desalination P roject at key stages of the design process, including: Basis of Design 6 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 51, Packet Page 77 DRAFT February 21, 2013 — Subject to Revision O 30%Design O 60%Design O 90%Design, and O Final Design As used in this paragraph, major changes to the P roject shall include changes having an increase or decrease in costs of the Desalination P roject that exceed $1 million. 4. The Governance Committee may issue recommendations concerning the establishment of a community outreach program. 5. The Governance Committee may recommend the Desalination P roject's aesthetic attributes and design consistent with community values if not covered by Category A(3) above; 6. The Governance Committee may coordinate with Cal-Amand recommend solutions to issues concerning the use of the Brine Discharge I nfrastructure; 7. The Governance Committee may review and recommend whether to adopt any value engineering recommendations issued by the Value Engineer; 8. The Governance Committee may review and recommend whether to approve any change order pertaining to any component or components of the Desalination P roject, if the change order exceeds $1 million. Category C 1. Cal-Amshall monitor the design, engineering, and permitting of all elements of the Desalination P roject, and report on such monitoring to the Governance Committee as described in Section VI . The Governance Committee shall discuss Cal-Am's report and may issue recommendations to Cal-Ampertaining to the Desalination P roject; 2. P rior to Cal-Am's commencement of negotiations with a selected contractor relating to a Contract, the Governance Committee may review and issue recommendations concerning contract terms relating to such Contract; 3. The Governance Committee may review and issue recommendations concerning the preparation and quarterly update of an overall construction budget for the Desalination P roject; 4. The Governance Committee may review and issue recommendations concerning a plan for acceptance testing, including follow-up reporting, for the Desalination P roject; 5. The Governance Committee may annually review and issue recommendations concerning the Desalination P roject operations and maintenance budget and rate impacts; 6. The Governance Committee may review and issue recommendations to Cal-Am with respect to local and regional permit requirements; and 7. The Governance Committee may review and issue recommendations concerning the preparation of quarterly progress reports during major design milestones (i.e., 30%design, 60% design, 90%design, and final design) and information on any material challenges to the P roject design. E. Additional Matters. I f agreed unanimously by all members of the Governance Committee, including Cal-Am, additional matters not provided for herein may be added to Category A for decision or recommendation by the Governance Committee or to Category B for recommendation from the Governance Committee. Additional matters may also be added to Category Cfor recommendation 7 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 52, Packet Page 78 DRAFT February 21, 2013 — Subject to Revision fromthe Governance Committee upon affirmative vote of the Governance Committee unless Cal-Am determines that the addition of the matter to Category Cwould unreasonably delay the P roject or otherwise compromise the public interest. I f Cal-Amdetermines that a matter affirmed by the Governance Committee for addition to Category Cshould not be so added, Cal-Amshall issue a written explanation to the Governance Committee within ten (10) calendar days following the Governance Committee's vote to add the matter to Category Cthat explains the reasons supporting Cal-Am's determination. VI . Meetings and Action of the Governance Committee; Agendas and Minutes A. Meetings. Governance Committee meetings shall be conducted in compliance with the Ralph M. Brown Act (Government Code sections 54950, et seq.). The first meeting of the Governance Committee shall be scheduled by the primary representative of the MP WMD, and that representative shall preside over the first meeting at which a Chair and Vice-Chair shall be selected. Thereafter, the Chair, or in his or her absence, the Vice-Chair, shall schedule and preside over all meetings of the Governance Committee. During the pre-construction and construction phases of the Desalination P roject, regular meetings of the Governance Committee shall be scheduled by the Chair, or in his or her absence, the Vice-Chair, and held on a monthly basis. During the operational phase of the Desalination P roject, regular meetings of the Governance Committee shall be scheduled by the Chair, or in his or her absence, the Vice-Chair, and held on a quarterly basis for the first two years of the Desalination P roject's operation and semi-annually thereafter. Special meetings of the Governance Committee, including for purposes of responding to a Cal-AmNotification, may be called by the Chair, or in his or her absence, the Vice-Chair, or by any member of the Governance Committee upon request of the Chair, or in his or her absence, the Vice-Chair. B. Action by the Governance Committee. All decisions and recommendations of the Governance Committee issued to Cal-Amshall be in writing, signed by the Chair or Vice-Chair. All other actions of the Governance Committee shall be by motion recorded in written minutes. C. Agendas, Correspondence, and Minutes. Agendas, correspondence, and minutes of the meetings of the Governance Committee shall be taken, maintained, and distributed by a designated staff member of the MP WMD. VI I . Quorum and Affirmative Action of the Governance Committee To constitute a quorumat all meetings of the Governance Committee for the transaction of business, the primary or alternate elected official representative of at least three of the P arties must be present, in person. Action by the Governance Committee shall require the affirmative vote of at least two of the three P ublic Entity Members of the Governance Committee. VI I I . Submission of Project I nformation to the Governance Committee; Project I nspections Concurrent with Cal-Am's submission of any documents concerning the P roject to the CP UC, Cal-Am shall provide a copy of the documents (in paper or electronic form) to the Chair of the Governance Committee. The Chair may notice a meeting on his or her own initiative, or upon the request of any member of the Governance Committee to review any financial matter addressed by the documents. Cal- Am, upon request of the Chair of the Governance Committee, shall be afforded an opportunity to provide a presentation or any oral explanation relating to the noticed financial matter. Further, upon reasonable advanced, written notice and subject to safety and security concerns and precautions as determined in good faith by Cal-Am, any member(s) of the Governance Committee may inspect any physical facility or structure constructed or being constructed as an element of the Desalination P roject, and Cal-Amshall provide an employee, consultant, or other representative, who is knowledgeable of the aspects and elements of the physical facility or structure, to accompany the member(s) of the Governance Committee during the inspection. I X. Term and Termination of Agreement 8 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 53, Packet Page 79 DRAFT February 21, 2013 — Subject to Revision This Agreement shall continue in effect until the earlier of (1) the date that is forty (40) years after the effective date of this Agreement (February , 2053), or (2) the date that Cal-Amceases to operate the Desalination P roject, the earlier such date to be known as the "Expiration Date". Further, this Agreement may be terminated, prior to the Expiration Date, as follows: (1) by Cal-Am, following the issuance of an order fromthe CP UCordering Cal-Amnot to participate in this Agreement, as provided for in Section I above; (2) by Cal-Am, if the CP UCdenies or rescinds Application A.12-04-019 or denies Cal-Am's development of, or subsequently rescinds Cal-Am's authority to develop, the Desalination P roject; or (3) by the written agreement of no less than three of the four members of the Governance Committee. I f, on August •, 2052, the Desalination P roject is still being operated by Cal-Am, the P arties shall, within thirty days thereafter, meet and commence negotiations in good faith to seek a renewal of this Agreement, upon mutually acceptable terms, to provide continued public oversight and input concerning the operation, maintenance, repair, modification, and/or replacement of the Desalination P roject after the Expiration Date. I f this Agreement is terminated by Cal-Amas a result of a CP UCorder denying or rescinding Application A.12-04-019 or Cal-Am's authority to develop the Desalination P roject, but Cal-Am intends to seek CP UCapproval to develop a substitute project to provide water supplies for its Monterey District, then the P arties shall meet and negotiate in good faith to seek agreement, upon mutually acceptable terms, for a substitute agreement to provide public oversight and input concerning the design, permitting, construction, operation, maintenance, repair, modification, and/or replacement of such substitute project. X. Miscellaneous A. Further Assurances. The P arties shall execute such further documents and do any and all such further things as may be necessary to implement and carry out the intent of this Agreement. B. Construction. The provisions of this Agreement shall be liberally construed to effectuate its purposes. The language of this Agreement shall be construed simply according to its plain meaning and shall not be construed for or against any P arty, as each P arty has participated in the drafting of this Agreement and had the opportunity to have their counsel review it. C. Choice of Law. This Agreement shall be governed and construed under the laws of the State of California, with venue proper only in Monterey County. D. Severabilitv. I f any termor provision of this Agreement is determined to be illegal, unenforceable, or invalid in whole or in part for any reason, such illegal, unenforceable, or invalid provision or part thereof, shall be stricken fromthis Agreement, and such provision shall not affect the legality, enforceability, or validity of the remainder of this Agreement. I f any provision or part of this Agreement is stricken in accordance with the provisions of this section, then the stricken provision shall be replaced, to the extent possible and as agreed to by the P arties, with a legal, enforceable and valid provision that is as similar in content to the stricken provision as is legally possible. E. Dispute Resolution. I f a dispute arises between two or more of the P arties relating to this Agreement, or the rights and obligations arising therefrom, and if the P arties in dispute are unable to resolve the controversy through informal means, the P arties in dispute may, upon mutual agreement, submit the dispute to mediation, upon terms mutually agreed to by the P arties in dispute. Any P arty not in dispute as to the disputed matter shall be afforded an opportunity to participate in the mediation. I n addition, if the P arties in dispute are unable to resolve the controversy through mediation, the P arties in dispute may, upon mutual agreement, submit the dispute to binding arbitration, upon terms mutually agreed to by the P arties in dispute. Any P arty not in dispute as to the disputed matter may, upon the mutual agreement of the P arties in dispute, be invited to participate in any binding arbitration. F. Members to Bear their Own Costs. Each P arty shall bear its own costs relating to the rights and obligations of each P arty arising fromthis Agreement and its participation in the Governance Committee and, therefore, no P arty shall be entitled to any reimbursement fromanother P arty as a result of any provision of this Agreement. 9 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 54, Packet Page 80 DRAFT February 21, 2013 — Subject to Revision G. Notices and Communication. Any notice or communication hereunder shall be deemed sufficient if given by one P arty to another P arty or P arties, as appropriate, in writing and either (1) delivered in person, (2) transmitted by electronic mail and acknowledgment of receipt is made by the receiving P arty(ies), (3) deposited in the United States mail in a sealed envelope, certified and with postage and postal charges prepaid, or (4) delivered by a nationally-recognized overnight delivery courier service, and addressed as follows: I f to Cal-Am: with a copy to: I f to the MP RWA: with copies to: California-American Water Company Attn: Robert MacLean P resident 1033 B Avenue, Suite 200 Coronado, CA 92118 Email: [email protected] California-American Water Company Attn: Anthony Cerasuolo Vice P resident - Legal 1033 B Avenue, Suite 200 Coronado, CA 92118 Email: acerasuoloamwater.com Monterey P eninsula Regional Water Authority Attn: Lesley Milton Clerk City of Monterey 351 Madison St. Monterey, CA 93940 miltonAmonterey.orq Monterey P eninsula Regional Water Authority Attn: Donald Freeman General Counsel West Side of San Carlos &8th P .O. Box 805 Carmel, CA 93921 [email protected] Monterey P eninsula Regional Water Authority Attn: Russell McGlothlin Special Counsel 21 E. Carrillo St., Santa Barbara, CA 93101 [email protected] I f to the MP WI VI D: with a copy to: Monterey P eninsula Water Management District Attn: David J. Stoldt General Manager 5 Harris Court — Bldg G Monterey, CA 93940 Email: [email protected] Monterey P eninsula Water Management District Attn: David C. Laredo General Counsel 5 Harris Court — Bldg G Monterey, CA 93940 10 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 55, Packet Page 81 DRAFT February 21, 2013 — Subject to Revision I f to the County: dave(W,laredolaw.net County of Monterey Board of Supervisors CI OClerk of the Board of Supervisors 168 West Alisal Street 1 5` Floor Salinas, CA, 93901 112-clerkoftheboardeveryoneco.monterey.ca.us with a copy to: Monterey County Counsel Attn: Charles J. McKee 168 West Alisal Street 3rd Floor Salinas, CA 93901 [email protected] or to such other address or to such other person as each P arty shall have last designated for receipt of notices pursuant to this Agreement. Where this Agreement provides for written notices or communication fromCal-Amto the Governance Committee, such written notice, explanation, or communication shall be directed to the Chair of the Governance Committee at the address set forth above for notices to the public entity fromwhich the Chair is appointed, and when provided shall be deemed provided to all P ublic Entity Members of the Governance Committee. The effective date of any written notice, explanation, or communication shall be the earlier of the date of actual receipt, acknowledgment of receipt, or three days following deposit in the United States mail. H. Successors and Assigns. This Agreement shall be binding on and shall inure to the benefit of the P arties and their respective legal representatives, successors, and assigns. I . No Third P arty Rights. Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the P arties to this Agreement and their respective successors and assigns, nor shall any provision in this Agreement give any third persons any right of subrogation or action over or against any P arty to this Agreement. J. Effective Date. This Agreement shall take effect on date first stated above. I N WI TNESS WHEREOF, the P arties have executed this Agreement as of the date first stated above. [signature page follows] MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 56, Packet Page 82 DRAFT February 21, 2013 — Subject to Revision California-American Water Company By: Robert MacLean, P resident Monterey P eninsula Regional Water Authority By: Chuck Della Sala P resident Agreed as to form: By: Donald Freeman General Counsel Monterey P eninsula Water Management District By: David P endergrass Chair Agreed as to form: By: David Laredo General Counsel County of Monterey By: Fernando Armenta Chair of the Board of Supervisors Agreed as to form: By: Charles McKee County Counsel 12 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 57, Packet Page 83 1T2 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 58, Packet Page 84 Monterey Peninsula Regional Water Authority (MPRWA) Deliberative Document The Water Authority considered and adopted this position statement as direction to our staff and consultants in preparing PUC testimony due February 22nd, 2013. This position is adopted now, in advance of a completed EIR and in recognition that more information will be forthcoming, because the PUC decision process is underway and the Water Authority seeks to have a voice in that process. This document was adopted at the January 31, 2013 MPRWA Special Meeting. Position Statement: Reiterate our support for a portfolio approach. This includes GWR, ASR, and PG small projects, all of which have public ownership, in addition to a desal project described here. Reference our previously adopted policy points regarding public contribution. Any project must meet four basic criteria: 1. Project economics must be competitive. 2. Project must have suitable public governance, public accountability and public transparency. 3. Project must have clear path to permitting and constructing the facility as near to the CDO deadline as feasible. 4. Project must have contingency plans to address significant technical, permitting and legal risks. None of the three projects (Cal-Am, Deepwater Desal or DWD, or People's Moss Landing or PML) as proposed meet these criteria. Therefore, none of the three projects as proposed warrant Water Authority support. However, at this time Cal- Am's proposed project appears to be closest to meeting these four criteria. Cal-Am's Project would earn our support if Cal-Am makes certain modifications. Consequently, the Authority's support for the Cal-Am Project is subject to the following conditions: 1. Cal-Am must accept a significant contribution of public funds. Without the interest rate advantages afforded by such approach, the costs of water from the Cal-Am Project will be materially higher, and likely substantially in excess of the cost of water from the alternative projects. A significant contribution of public funds will avoid such an unwarranted expense to Cal-Am's rate payers; 2. Cal-Am must agree, upon mutually-acceptable terms, to form a Governance Committee to provide publicly-accountable oversight of the project; 3. Cal-Am must diligently seek to secure lower electricity rates for the project (e.g., $0.08-$0.09 cents/kWh as most recently estimated by Cal-Am) including agreement to purchasing power through a municipal electrical utility, generation of on-site power if necessary, other public entity or other source of low-cost power; MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 59, Packet Page 85 Monterey Peninsula Regional Water Authority (MPRWA) 4. Cal-Am must agree to limit the use of revenue from Cal-Am's Surcharge 2 to reduce risk to Cal-Am ratepayers in the event the Cal-Am project does not move forward. For example, Cal-Am could agree only to use Surcharge 2 to fund lower risk parts and phases of the project (such as only the construction phase after the issuance of a Coastal Development Permit from the Coastal Commission) or could provide other mechanisms of reducing the risk to Cal- Am ratepayers. S. To promptly address concerns pertaining to Cal-Am's proposed intake wells, Cal-Am must: o Address or cause to be address all issues raised in the December 2012 Tim Durbin testimony; o proceed with the planned test wells and any other advanced geotechnical work to support the proposed intake wells as soon as practically feasible; o collaborate with local public agencies to advance permitting efforts with other responsible agencies, including the California Coastal Commission; o seek to clarify whether the installation of Cal-Am's intake wells will require approval from any federal agency, which would, in turn, require NEPA compliance; and 6. Continue to explore and advance alternative intake strategies as a contingency if Cal-Am's proposed intake wells prove legally or technically infeasible. o Cal-Am must fully develop a contingency plan or plans and implement that plan or those plans for source water that do not involve wells in the Salinas Basin. This must be done concurrently along with Cal-Am planning and testing of slant wells. 7. Cal-Am must show something in writing from the State demonstrating its ability to secure SRF financing. Absent such a document, the Water Authority will work with the Water Management District to secure SRF financing as public agencies. Cal-Am must accept a public agency partner for SRF purposes if necessary, even if doing so results in a reduction in Cal-Am's equity position. 8. Cal-Am must address questions about sea level rise and coastal erosion with respect to the placement and longevity of theirproposed slant wells. Coastal sands are also prone to liquefaction in seismic events and coastal facilities are susceptible to damage from tsunami events as well. If Cal-Am meets the above conditions, the Authority conditionally supports the Cal- Am Project because: 1. Cal-Am's desal project size appears to be consistent with the Water Authority's position of focusing on water for "replacement and replenishment" including lots of record and economic rebound and accommodates the policy desire to pursue a portfolio of projects to meet the needs of our communities, thereby reducing the risk associated with any MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 60, Packet Page 86 Monterey Peninsula Regional Water Authority (MPRWA) project failing or being delayed. The Coastal Commission identifies proposed projects with a "defined service area with a known level of build-out" as involving an "easier" review while projects with an "unknown or extensive service area" as involving a "more difficult" review. Cal-Am's project would involve this "easier" review while DWD would involve a "more difficult" review. 2. Cal-Am's project, DWD project and PML project are all in the planning stage although Cal-Am's project is the most "advanced" according to both SPI and the TAC. 3. permitting agencies will require the "least environmentally harmful feasible alternative" for source water intake. The Coastal Commission states that a subsurface intake (such as Cal-Am's proposed slant wells) involve an "easier" review while an open-water intake involves a "more difficult" review. State Water Board staff likely will recommend that subsurface is "preferred." If subsurface is not feasible, consider Track 2 (infiltration galleries or open water intake). It is unlikely that open water intake will be permitted unless test slant wells have shown subsurface intake to be infeasible. Any project must therefore include a test slant well. Only Cal-Am's project proposes to do so. 4. only Cal-Am has demonstrated ability to finance a project. Their financing plan is comprised of four different sources of capital; short-term construction financing, Surcharge 2, SRF, and equity. Neither of the other two projects have a detailed financing plan and neither would likely have access to short- term construction financing, Surcharge 2 or SRF, all advantageous forms of financing (Cal-Am offers the short-term construction financing but only for their project. Surcharge 2 is only permitted for a Cal-Am facility. SRF is unlikely to be available for open water intake.) We propose to include a significant public contribution as a fifth source of capital. Doing so would significantly lower the Net Present Value (NPV) cost of the project. 5. Cal-Am has the capital necessary to complete the permitting of its project. Neither of the other projects have demonstrated this ability. 6. Cal-Am has indicated the potential for securing electricity at $0.087 per kwh and could possibly purchase electricity at a lower rate through a municipal electrical utility formed by a local public agency. DWD's proposed municipal electrical utility involves the City of Salinas and its success is therefore outside of the direct control of the Water Authority. 7. the ultimate unit cost of water from the Cal-Am Project in comparison to the cost of water from the DWD and PML projects are close in amount presuming a significant public contribution is made to lower the financing costs of the Cal-Am Project and that Cal-Am secures electricity in the $0.08-0.09 per lcwh range. a. SPI estimates that Cal-Am's production cost would be $2, 310/$3, 015 per acre foot for the larger/smaller desal projects respectively if the cost of financing is brought down to 4% and the cost of electricity is reduced to $0.087 per kvvh. This is within about 10% of the unit MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 61, Packet Page 87 Monterey Peninsula Regional Water Authority (MPRWA) production costs of DWD ($2, 100/$2, 670) and is largely due to the increased cost of slant wells. b. The range of these estimates is minus 30% to plus 50%. The TAG recommends the Water Authority focus its attention on the ranges. c. For the larger plant, the range of the cost per acre foot of Cal-Am's project with Water Authority conditions is $1617 to $3465. The corresponding range for DWD is $1470 to $3150. d. For the smaller plant, the range of the cost per acre foot of Cal-Am's project with Water Authority conditions is $2110 to $4522. The corresponding range for DWD is $1870 to $4005. 8. The DWD project involves a "complex" relationship of various entities, including a municipal electrical utility, a data center, the formation of a regional JPA, a water purchase agreement with Cal-Am. The Water Authority is not aware that any of these relationships have been established. This unresolved complexity leaves more room for possible delay or failure. In contrast, Cal-Am's organization structure is described as "good" by SPI. 9. Both DWD and PML will likely face questions from permitting agencies regarding the placement of the desalination plant in relationship to the 100 year flood plain and sea level rise. It is unclear how either project will respond to such questions. 10. The CEQA review for Cal-Am's project is well underway and is being handled by the Public Utility Commission as the lead agency. Any court challenge to the CPUC's EIR must be made by a petition directly to the State Supreme Court (very few petition are granted), reducing the legal risk of a challenge and also reducing the likelihood of project delay in comparison to a CEQA challenge to a project involving a local lead agency. Moreover, the Authority reiterates its request that both alternatives be reviewed at a project level such that no further environmental review would be required if the Cal-Am project fails in whole or part. 11. The draft Governance Committee agreement strikes the right balance of ensuring that the most important decisions are either made by public agencies or are fully informed by recommendations from public agencies. The draft Governance Committee agreement avoids inserting the public agencies into decisions that are judged to be better made by a private entity. MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 62, Packet Page 88 XHE IT 3 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 63, Packet Page 89 File .m13-0155 No, 10:3 'St-WTI, <VP' crl 4: •"? CI 1. 1850' , onttrey County 168AA/est Meal Street, 1st Floor Salinas, CA 93901 Board Order 831.755500 AgreementNo.: A42392 Upon motion of Supervisor POttet, seconded by Supervisor Catcagno, and Oar- tied by thoSe rnernbers present, the Board of Supetvisors hereby: “ 1. Approved Agreement to Forth the IvIontereyPeninSUld WaterSiipply PicijeaGoVerna.nce COMinittee. and :anthoitite the Chair- to exedlite tlid- - agreeinent. 2. Appointed Supervisor Potter as a member and .Supervisor Salinas as an alternate to the Governance Connnittee.. 3. Supported, in concept, the:principles of the Monterey Peninsula Regional WaterAuthotity'S.PoSition Statement. PASSED AND ADOPTMloifthis 12th day of Pebruary 2Q:13, bythelollovving vole; to vit: AYES: Supervisors Armenta Ca1cagno, Salinas, Potter, and Parker NOES: •None ABSENT: None I, Gail T. Borkowski, Clerk of the Board of Supervisors of the County of Monterey, State of California, hereby cetWthat the foregoing is :a true copy of an original order of said Board of Supervisors duly made and entered' in the .inintites thereof of Minute Book 76 for the meeting on February 12,2013. Dated: February 21, 2013 Gail T. 13orkowski, Clerk:Of the Board of Supervisors FileNumber: 13- 0155 COthifk.of- Monterey, :Sae:a:California .. BY Ai., I' .6.— Deputy • - . . MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 64, Packet Page 90 A 14 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 65, Packet Page 91 SAM FARR 2071, DISTRICT, CALIFORNIA COMMITTEE ON APPROPRIATIONS SuucommrrrErc • AGRICULTURE, RURAL DEVELOPMENT, FOOD AM, DRUG Ant,SNIVTRATION, AND RELATED AGENCIES MluTARY CONSTRUCTION, VETERANS' AFFAIRS, AND RELATED AGENCIES CO-CHAM, CONGRESSIONAL ORGANIC CAUCUS OCROHAIII, CToori uGnIE,SoSati LUTSRAvEL AND Co• C.Aili, ROUSE OCEANS CAUCUS toitgregii of tbe Wtliteti tateti lOottsSe of ReptOentatibefS VIGa5 iiington, Alc 205 15 -05 20 1126 LunGwonni Housu Orme DuiLnnvc WASHillsrent. DC 205 15 -05 20 (202) 225 -2861 100 WEST AUSAL SAUNAS, CA 93901 (831) 424-2229: 701 OCEAN STREET Room 316 Sannik CRUZ, CA'98060 (831 (.429-1976 www.(arr.houstr.gov February 22, 2013 The Honorable Michael Peevey President California Public Utilities Commission 5 05 Van Ness Avenue San Francisco, CA 94102 Dear President Peevey: I am writing to express my support for the Monterey Peninsula Regional Water Authority's (MPRWA) position regarding California American Water's application to develop the Monterey Peninsula Water Supply Project (A, 12-04-019). The Mayors of the Monterey Peninsula have formed a joint powers authority to represent their constituents on water issues. In their testimony to the California Public Utilities Commission, the MPRWA expresses support for California American Water's project, provided it meets various conditions to strengthen local decision-making, lower rates, provide a diversified portfolio of water sUpply components, including groundwater replenishment, and finally, take steps to ensure the project stays on schedule and meets the terms of the State Water Resources Control Board's Cease and. Desist Order. I believe the conditions the MPRWA has proposed for the project go a long way towards building community consensus on an issue that has long divided the Monterey Peninsula. I am eager to see a viable solution move forward and I applaud the mayors for their collective leadership in pressing for tangible results. I welcome the CPUC's consideration of the MPRWA's testimony and the broad-based community and local, agency support-it represents in your important deliberations on our community's future water supply. SF/aa PRINTED ON RECYCLED PAPER MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 66, Packet Page 92 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 67, Packet Page 93 February 20, 2013 The Honorable Jason Burnett Mayor of Carmel by the Sea Carmel by the Sea, California RE: Support for the Monterey Peninsula Regional Water Authority's Conditional Support of the Monterey Peninsula Water Supply Project Dear Mr. Mayor, I am writing to follow-up from our recent call concerning the Monterey Peninsula Water Supply Project ("Project") proposed by the California-American Water Company ("Cal-Am"), and to specifically express my support for the position statement recently adopted by the Monterey Peninsula Regional Water Management Authority ("MPRWA") at its meeting on January 31. I have reviewed the position statement in full and believe that the conditions set forth therein for the MPRWA to support the Project are appropriate to protect the public's interest with respect to the Project. As you know, I have followed the ongoing water supply challenges on the Monterey Peninsula for several decades and I successfully authored legislation in 1998 (AB 1182) when I represented the Monterey Bay area in the state assembly, to require the California Public Utilities Commission to develop a viable alternative water supply project to the now defunct Carmel River Dam proposal. It is my opinion that numerous past water supply proposals have failed, at least in part, because of the lack of united community support and leadership for a specific project that is technically and legally viable, cost- effective, and which affords meaningful public participation and oversight. I believe the formation of the MPRWA and its recent leadership on the proposed Project may now assist in achieving a successful project provided that the conditions set forth in MPRWA's position statement are adopted and pursued. I wish the MPRWA success in achieving these goals. Please feel free to express my support for the MPRWA's position statement and to share this letter with the CPUC as a component of the MPRWA's upcoming submission of testimony concerning the Project. Sincerely, FRED KEELEY 121 Market Street Santa Cruz, California 95060 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 68, Packet Page 94 Xl IIIJT 6 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 69, Packet Page 95 M o n t e r e y B a y A q u a r i u m 886 CA NNPA t V Row Mori'mon., CA 939.1 o 831.618.4800 Fe br u a r y 19, 2013 M a y o r Chu ck De lla Sa la Pr e si de n t M o n t e r e y Pe n i n su la Re gi o n a l Wa t e r A u t ho r i t y P.O. B o x 5715 Ca r m e l-by -t he -Se a , CA 93921 De a r M a y o r De lla Sa la , I a m wr i t i n g t o e xpr e ss m y fu ll su ppo r t fo r t he Po si t i o n St a t e m e n t a do pt e d by t he M o n t e r e y Pe n i n su la Re gi o n a l Wa t e r A u t ho r i t y o n Ja n u a r y 31, 2013 r e ga r di n g t he wa t e r su pply pr o je ct pr o po se d by Ca li fo r n i a -A m e r i ca n Wa t e r Co m pa n y (Ca l A m ). The co n di t i o n s y o u a r t i cu la t e d t o i n cr e a se a ffo r da bi li t y , a cco u n t a bi li t y a n d t r a n spa r e n cy , a n d t o m i n i m i ze t he le ga l a n d t e chn i ca l r i sks i n t he de ve lo pm e n t o f Ca l A m 's wa t e r pr o je ct a r e cr i t i ca l t o pr o t e ct i n g t he i n t e r e st s o f Pe n i n su la r e si de n t s a n d bu si n e sse s. I co m m e n d y o u fo r y o u r le a de r shi p, cr e a t i vi t y a n d pe r se ve r a n ce t o fi n d a vi a ble wa t e r su pply so lu t i o n fo r o u r co m m u n i t y . A se cu r e wa t e r su pply fo r t he Pe n i n su la i s vi t a l t o o u r a bi li t y t o fu lfi ll o u r m i ssi o n a s a vi si t o r - se r vi n g de st i n a t i o n , a n e du ca t i o n a l i n st i t u t i o n a n d a le a de r i n o ce a n co n se r va t i o n . The a q u a r i u m a t t r a ct s m o r e t ha n 1.8 m i lli o n vi si t o r s t o t he Pe n i n su la a n n u a lly , a m a jo r i t y o f who m st a y . o ve r n i ght i n lo ca l lo dgi n gs. In a ddi t i o n , we pr o vi de fr e e vi si t s fo r n e a r ly 100,000 scho o lchi ldr e n e a ch y e a r , a n d fr e e vi si t s fo r t e n s o f t ho u sa n ds o f lo w-i n co m e fa m i li e s t hr o u gho u t t he r e gi o n . The a q u a r i u m e m plo y s a ppr o xi m a t e ly 500 fu ll- a n d pa r t -t i m e e m plo y e e s du r i n g o u r pe a k su m m e r se a so n , a n d m o r e t ha n 400 e m plo y e e s y e a r r o u n d. Re st r i ct i o n s o n wa t e r su pply wo u ld se ve r e ly de cr e a se t he n u m be r o f vi si t o r s we a r e a ble t o se r ve . If ho t e ls ha ve t o li m i t t he i r r o o m a va i la bi li t y be ca u se o f i n su ffi ci e n t wa t e r su ppli e s, a m a jo r i t y o f o w Vi si t o r s wo u ld be le ss li ke ly t o vi si t . B e ca u se t o u r i sm i s t he Pe n i n su la 's le a di n g i n du st r y a n d a m a jo r so u r ce o f r e ve n u e fo r ci t y se r vi ce s, o u r co m m u n i t y fa ce s e co n o m i c co lla pse wi t ho u t a su ffi ci e n t a n d r e li a ble wa t e r su pply . We ca n o n ly m e e t t he m a n da t e t o r e pla ce wa t e r t ha t ha s be e n a va i la ble fr o m t he Ca n n e l Ri ve r wi t h a di ve r si t y o f su pply so u r ce s, i n clu di n g de sa li n a t i o n , a q u i fe r st o r a ge a n d r e t r i e va l, gr o u n dwa t e r r e cha r ge , a n d co n t i n u e d co n se r va t i o n . We e n co u r a ge fu ll pu r su i t o f a ll t he se o pt i o n s. Fo r de sa li n a t i o n , we a r e r e ly i n g o n a r o bu st e n vi r o n m e n t a l r e vi e w pr o ce ss t o i de n t i fy ho w t hi s pr o ce ss ca n pr o vi de t he be st se r vi ce t o o u r co m m u n i t y wi t h t he le a st i m pa ct po ssi ble o n t he e n vi r o n m e n t . A s y o u kn o w, o u r co m m u n i t y 's we ll-be i n g i s di r e ct ly li n ke d t o t he he a lt h o f o u r o ce a n a n d co a st s. We wi ll be m o n i t o r i n g t he e n vi r o n m e n t a l r e vi e w pr o ce ss clo se ly , a n d a wa i t i t s co n clu si o n be fo r e we fu lly e n do r se Ca l A m 's pr o po sa l. hlt/NTEREV BAV t; II RI ts .LIRG MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 70, Packet Page 96 Monte re y Ba y Aq u a k m I ha ve wr i t t e n t o t he Pu bli c A dvi so r o f t he Ca li fo r n i a Pu bli c Ut i li t i e s Co m m i ssi o n u r gi n g t he Co m m i ssi o n t o t ho r o u ghly a n d e xpe di t i o u sly pr o ce ss Ca l A m 's a ppli ca t i o n fo r t he M o n t e r e y Pe n i n su la Wa t e r Su pply Pr o je ct . I ha ve a lso st a t e d o u r e n do r se m e n t o f t he po li cy co n di t i o n s a ppr o ve d by t he M o n t e r e y Pe n i n su la Re gi o n a l Wa t e r A u t ho r i t y : pu r su i t o f pu bli c fi n a n ci n g t o ke e p r a t e s a ffo r da ble ; a n d i n clu si o n o f pu bli c a cco u n t a bi li t y , t r a n spa r e n cy a n d su ffi ci e n t co n t i n ge n cy pla n s t o a ddr e ss t he t e chn i ca l a n d le ga l r i sks o f t he pr o je ct . Tha n k y o u a ga i n fo r y o u r t i r e le ss se r vi ce a n d le a de r shi p t o so lve o u r co m m u n i t y 's wa t e r su pply n e e ds. B e st r e ga r ds, Ju li e Pa cka r d Exe cu t i ve Di r e ct o r MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 71, Packet Page 97 MPRWA EXF MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 72, Packet Page 98 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 73, Packet Page 99 Separation Processes, Inc. 3156 Lionshead Ave., Suite 2 Carlsbad, CA 92010 Tel: 760-400-3660 Fax: 760-400-3661 www.spi-engineering.com Date: To: From: Subject: Projects January 17, 2013 Jason Burnett Alex Wesner January 2013 Update to SPI-KHC Report — Evaluation of Seawater Desalination In this update to the Final Report issued in December 2012, we have amended portions of the report to address several changes among proponent projects as well as undertake additional sensitivity analyses of evaluated costs for some projects. The principal changes can be described as follows: 1. DWD has relocated their facility site from the Capurro Ranch property north of the Elkhorn Slough to the Moss Landing Power Plant site. This relocation impacts their project cost model (mainly in regard to off-site pipelines) and permitting. The impacts of this relocation are assessed in the updated report. 2. The implementation schedule for Cal-Am's proposed test well has been delayed. The schedule impact associated with this delay is assessed. 3. Members of the MPRWA board and TAC were interested in several areas of cost sensitivity. The overall accuracy range of the costs included in the report was listed more explicitly, along with inclusion of a potential range of water production costs associated with the uncertainty. Cost sensitivity analyses were also prepared for both Cal-Am and DWD. Cal-Am costs were evaluated for the consequence of increased slant well failure/replacement; along with their potential acquisition of power at an annual average rate of $0.087/kW-hr. DWDs revised base costs were further evaluated for potential lower power rates of $0.06 and $0.04 per kW-hr. To help clarify changes to the documents; deletions of inapplicable text were struck through (example), while additions/changes are shown in red text (example). The main exception is in table figures, which show only the revised numbers in red text in order to preserve overall table format and presentation. Similarly, new tables have their numbers and titles in red text; but the actual table content left standard. MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 74, Packet Page 100 Evaluation of Seawater Desalination Projects Final Report Update January 2013 prepared for: Monterey Peninsula Regional Water ithority by: Separation Processes, Inc. and Kris Helm Consulting MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 75, Packet Page 101 MONTEREY PENINSULA REGIONAL WATER AUTHORITY TABLE OF CONTENTS CONTENTS EXECUTIVE SUMMARY ES-1 PROJECT SUMMARIES ES-1 PROJECT FUNCTION ES-2 PROJECT PERFORMANCE ES-4 ECONOMICS ES-5 IMPLEMENTATION CONSIDERATIONS ES-7 1 INTRODUCTION 1-1 2 PROJECT SUMMARIES 2-1 2.1 CALIFORNIA AMERICAN WATER (CAL-AM) 2-2 2.2 DEEP WATER DESAL (DWD) 2-4 2.3 PEOPLES MOSS LANDING (PM L) 2-6 3 PROJECT FUNCTION 3-1 3.1 CALIFORNIA AMERICAN WATER (CAL-AM) 3-1 3.1.1 Project Purpose 3-1 3.1.2 Customers Identified 3-1 3.1.3 Adequacy of Treatment Approach 3-1 3.1.4 Residuals Handling 3-4 3.1.5 Feed Water Characterization 3-4 3.1.6 Quality of Project Information 3-4 3.1.7 Omissions or Fatal Flaws 3-5 3.2 DEEPWATER DESAL (DWD) 3-6 3.2.1 Project Purpose 3-6 3.2.2 Customers Identified 3-6 3.2.3 Adequacy of Treatment Approach 3-6 3.2.4 Residuals Handling 3-8 3.2.5 Feed Water Characterization 3-8 3.2.6 Quality of Project Information 3-8 3.2.7 Omissions or Fatal Flaws 3-9 3.3 PEOPLES MOSS LANDING (PM L) 3-9 3.3.1 Project Purpose 3-9 3.3.2 Customers Identified 3-9 3.3.3 Adequacy of Treatment Approach 3-9 3.3.4 Residuals Handling 3-11 3.3.5 Feed Water Characterization 3-12 3.3.6 Quality of Project Information 3-12 3.3.7 Omissions or Fatal Flaws 3-12 4 PROJECTED PERFORMANCE 4-1 4.1 CALIFORNIA AMERICAN WATER (CAL-Am) 4-1 4.1.1 Plant Design Capacity 4-1 4.1.2 Targeted Product Water Quality 4-2 4.1.3 Disinfection Strategy 4-3 4.2 DEEPWATER DESAL (DWD) 4-4 4.2.1 Plant Design Capacity 4-4 4.2.2 Targeted Product Water Quality 4-4 4.2.3 Disinfection Strategy 4-5 4.3 PEOPLES MOSS LANDING (PM L) 4-5 January 2013 Pagel MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 76, Packet Page 102 TABLE OF CONTENTS MONTEREY PENINSULA REGIONAL WATER AUTHORITY 4.3.1 Plant Design Capacity 4-5 4.3.2 Targeted Product Water Quality 4-5 4.3.3 Disinfection Strategy 4-6 5 ECONOMICS 5-1 5.1 CALIFORNIA AMERICAN WATER (CAL-Am) 5-5 5.2 DEEPWATER DEAL (DWD) 5-8 5.3 PEOPLES MOSS LANDING (PM L ) 5-12 6 IMPL EMENTATION CONSIDERATIONS 6-1 6.1 CALIFORNIA AMERICAN WATER (CAL-Am) 6-3 6.2 DEEPWATER DESAL (DWD) 6-7 6.3 PEOPLES MOSS LANDING (PML) 6-10 6.3.1 Assessment of Impacts of Seawater Intake 6-10 6.3.2 Brine Discharge 6-11 7 REFERENCES 7-1 APPENDIX A — RESPONSES TO COMMENTS ON NOVEMBER DRAFT REPORT A-1 LIST OF TABLES TABLE ES-1-1— SUMMARY OF PROPOSED PRODUCT WATER QUALITY ES-4 TABLE ES-1-2 - SUMMARY OF EVALUATED CAPITAL AND OPERATING COST ESTIMATES ES-6 TABLE 4-1 — SUMMARY OF PROJECTED PRODUCT QUALITY FROM CAL-AM FACILITY 4-3 TABLE 4-2 — SUMMARY OF PROJECTED PATHOGEN CREDITS FOR CAL-AM PROJECT 4-3 TABLE 4-3 — SUMMARY OF PROJECTED PRODUCT QUALITY FROM DWD FACILITY 4-4 TABLE 4-4 - SUMMARY OF PROJECTED PATHOGEN CREDITS FOR DWD PROJECT 4-5 TABLE 4-5 —SUMMARY OF PROJECTED PRODUCT QUALITY FROM PM L FACILITY' 4-6 TABLE 4-6 - SUMMARY OF PROJECTED PATHOGEN CREDITS FOR PM L PROJECT 4-6 TABLE 5-1—SUMMARY OF CHEMICAL UNIT PRICES 5-2 TABLE 5-2 — SUMMARY OF EVALUATED CAPITAL AND OPERATING COST ESTIMATES 5-4 TABLE 5-3 — SUMMARY OF CAL-AM CAPITAL COST EVALUATION 5-6 TABLE 5-4 —SUMMARY OF CAL-AM O&M COST EVALUATION 5-7 TABLE 5-5 —SUMMARY OF CAL-AM COST SENSITIVITY EVALUATIONS 5-8 TABLE 5-6 —SUMMARY OF DWD CAPITAL COST EVALUATION 5-9 TABLE 5-7 —SUMMARY OF DWD O&M COST EVALUATION 5-10 TABLE 5-8- SUMMARY OF DWD COST SENSITIVITY EVALUATIONS 5-11 TABLE 5-9 — SUMMARY OF PM L CAPITAL COST EVALUATION 5-12 TABLE 5-10 — SUMMARY OF PM L O&M COST EVALUATION 5-13 LIST OF FIGURES FIGURE ES-1 — PROJECTED CAL-AM PROJECT IMPLEMENTATION SCHEDULE ES-8 FIGURE ES-2 — PROJECTED DWD PROJECT IMPLEMENTATION SCHEDULE ES-8 FIGURE ES-3 — PROJECTED PM L PROJECT IMPLEMENTATION SCHEDULE ES-8 FIGURE 2-1 — CAL-AM PROJECT LOCATION MAP 2-3 FIGURE 2-2-- DWD PROJECT LOCATION MAP 2-5 FIGURE 2-3 — PM L PROJECT LOCATION MAP 2-7 FIGURE 6-1— CONCEPTUAL IMPLEMENTATION SCHEDULE FOR THE CAL-AM PROJECT 6-6 January 2013 Page ii MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 77, Packet Page 103 MONTEREY PENINSULA REGIONAL WATER AUTHORITY TABLE OF CONTENTS FIGURE 6-2 — CAL-Am PROPOSED IMPLEMENTATION SCHEDULE 6-6 • FIGURE 6-3 — DWD PROPOSED IMPLEMENTATION SCHEDULE 6-7 FIGURE 6-4 — CONCEPTUAL IMPLEMENTATION SCHEDULE FOR THE DWD PROJECT 6-9 FIGURE 6-5 - CONCEPTUAL IMPLEMENTATION SCHEDULE FOR THE PM L PROJECT 6-11 ABBREVIATIONS 4N1 ACRONYMS AACE — Association for the Advancement of Cost Engineering AF — Acre-Foot AFY — Acre-Feet/Year ASR — Aquifer Storage and Recovery Cal-Am — California American Water CDPH — California Department of Public Health CEQA — California Environmental Quality Act CPCN - Certificate of Public Convenience and Necessity CPUC — California Public Utilities Commission CRF — Capital Recovery Factor Crypto - Cryptosporidium CSIP — Castroville Seawater Intrusion Project DWD — DeepWater Desal EA — Environmental Assessment FAIR — Environmental Impact Report EIS — Environmental Impact Statement EPA — U.S. Environmental Protection Agency ERD — Energy Recovery Device fps — feet per second FPVC — Fusible Polyvinyl Chloride\ gfd — Gallons per Day per Square Foot GWR — Groundwater Replenishment liDPE — High Density Polyethylene TPA — Joint Powers Authority KHC — Kris Helm Consulting lb - pound LF — Lineal Foot January 2013 Page iii MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 78, Packet Page 104 TABLE OF CONTENTS MONTEREY PENINSULA REGIONAL WATER AUTHORITY MCL — Maximum Contaminant Level MPRWA — Monterey Peninsula Regional Water Authority MRWPCA — Monterey Regional Water Pollution Control Agency mgd — Million Gallons per Day MT' — Micro filtration MG — Million Gallons MLCP — Moss Landing Commercial Park MIPP — Moss Landing Power Plant MPWSP — Monterey Peninsula Water Supply Project NEPA —National Environmental Policy Act NOD —Notice of Determination NOP — Notice of Preparation NOAA — National Oceanic and Atmospheric Administration NPDES — National Pollutant Discharge Elimination System O&M — Operations and Maintenance PG&E — Pacific Gas and Electric PML — Peoples Moss Landing RO —Reverse Osmosis SCADA — Supervisory Control and Data Acquisition SDI — Silt Density Index SPI — Separation Processes Inc. SVGB — Salinas Valley Groundwater Basin SWRCB — State Water Resources Control Board SWTR — Surface Water Treatment Rule TAC — Technical Advisory Committee TBD — To Be Determined TDS — Total Dissolved Solids TOC — Total Organic Carbon UF - Ultrafiltration UV—Ultra Violet Light January 2013 Page iv MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 79, Packet Page 105 MONTEREY PENINSULA REGIONAL WATER AUTHORITY EXECUTIVE SUMMARY EXECUTIVE SUMMARY Separation Processes Inc. (SPI) in association with Kris Helm Consulting (KHC) is providing engineering and consulting support to the Monterey Peninsula Regional Water Authority (MPWRA) to assist with the evaluation of three candidate desalination projects on the Monterey Peninsula. This report presents the results of our evaluation of the projects, targeted at replacing supplies currently extracted from the Carmel River but subject to a 1995 order from the State Water Resources Control board to secure an alternate source of supply by December, 2016. The proposed strategy for meeting the projected annual demand within the California American Water service area of 15,250 acre-feet is a multi-pronged approach including permitted extractions from the Carmel River and Seaside Basin, an aquifer-storage and recovery system, and the existing Sand City desalination plant--totaling 6,250 acre-feet; leaving a 9,000 acre-feet gap in supply. Two alternatives are under consideration to compose this final supply—a 9,000 acre-feet production seawater desalination plant; or a 5,500 acre-feet seawater desalination plant in concert with a groundwater water replenishment project using advanced treated recycled water of 3,500 acre-feet. This report presents the results of our evaluation of three candidate alternatives for the seawater desalination component of the overall water supply portfolio. California American Water is actively engaged with the California Public Utilities Commission to build a facility and secure the required supply. Two other development groups have proposed alternative projects for consideration—DeepWater Desal, LLC and the People's Moss Landing Water Desal Project. The three projects were analyzed on functional, performance, economic and implementation grounds in an effort to provide a balanced evaluation for consideration by the MPRWA. This report is based on information collected on each project up through October 15, 2012. It does not cover additional project developments between that time and the date of this report. PROJECT SUMMARIES The three projects are in the conceptual or preliminary stage of development and all three have as their, objective to provide California American Water the seawater desal component of the required replacement water supply under State Water Resources Control Board Order No. 95-10. The DeepWater Desal group proposes to provide an expandable plant capable of serving additional regional water needs as well, outside of the California American Water service area. Brief summaries of the projects follow: Monterey Peninsula Water Supply Project (MPWSP) Proponent(s) California American Water (Cal-Am) Location 46-acre site of vacant, disturbed land west of the MRWPCA Regional Treatment Plant (RTP). Purpose To supply supplemental desal component of the Monterey Peninsula regional water supply This project is currently under consideration by the California Public Utilities Commission (CPUC). Production Volume 5.4 mgd or 9.0 mgd t$F1) January 2013 Page ES-1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 80, Packet Page 106 EXECUTIVE SUMMARY MONTEREY PENINSULA REGIONAL WATER AUTHORITY Deep Water Desal (DVVD) Proponent(s) DeepWater Desal, LLC, Dynegy Moss Landing Power Plant, i s . ... — - -:-- "- - e— :. a - - - - - - - :- G3 Data Centers - - - Location Capurro Ranch Property, /Elkhorn Slough Moss north of Landing Power Plant Purpose Phase 1 to supply supplemental desal component of the Monterey Peninsula regional water supply Phase 2 to supply northern customers Production Volume Phase 1:4.9 mgd or 9.1 mgd Phase 2:22.0 mgd The People's Moss Landing Water Desal Project (PML) Proponent(s) DeSal America, LLC composed of Moss Landing Commercial Park, LLC; and Stanley and Patricia-Vance Lueck Location Moss Landing Commercial Park Purpose To supply supplemental desal component of the Monterey Peninsula regional water supply This project is currently proposed as alternative to the Cal- Am MPWSP. Production Volume 4.8 mgd or 9.4 mgd PROJECT FUNCTION We evaluated the function of each project in terms of project purpose, customers identified, adequacy of treatment approach, residuals handling, feed water characterization, quality of project information, and any omissions or fatal flaws in the information provided. The evaluation was conducted based on information provided in response to a 56-item questionnaire prepared by the MPRWA technical advisory committee and submitted by each proponent; along with additional information each provided in response to specific questions and interviews from SPI and KHC. All three projects have available sites for building the required treatment facilities; and credible seawater intake and brine disposal approaches, though there are substantive differences among them. Cal-Am proposes to use a group of subsurface slant intake wells (up to eight for the maximum capacity plant alternative); DWD proposes a new screened open ocean intake installed at roughly 65-ft of depth; and PML is considering options to use either an existing seawater intake pump station drawing from the Moss Landing Harbor, or potentially a new screened open Page ES-2 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 81, Packet Page 107 MONTEREY PENINSULA REGIONAL WATER AUTHORITY EXECUTIVE SUMMARY ocean intake installed coincident with an existing 51-in diameter concrete outfall pipeline owned by the Moss Landing Commercial Park. Cal-Am has projected there may up to 3 percent of groundwater from the Salinas Valley Groundwater Basin (SVGB) entrained with their intake supply that would need to be returned (as facility product water) to the basin. For brine disposal, Cal-Am and DWD propose to blend concentrated brine from the desal plants with existing outfall flows—Cal-Am blending with the existing Monterey Peninsula Regional Water Pollution Control Agency's wastewater plant outfall; and DWD using the existing cooling water return outfall at the Moss Landing Power Plant. Both sources have sufficient dilution and hydraulic capacities. PML proposes to use their existing 51-in diameter outfall, currently permitted to discharge magnesium-depleted seawater. There is some evidence of disrepair of the outfall in terms of pipeline integrity and condition of the existing diffusers which would need to be addressed along with the permitting of a non-shore diluted brine stream. Cal-Am and PML propose to serve only the identified demand within the Cal-Am service area at the two plant capacity increments under consideration; while DWD envisions a higher capacity regional project, capable of producing up to 25,000 AFY. DWD has not yet secured agreements with any potential customers. In terms of treatment approach—all three candidate teams propose to use reverse osmosis (RO) as the primary desalination technology. However, both DWD and PML propose a single pass RO system; while Cal-Am has proposed a partial double or two pass system—treating a portion of the product water from the first pass RO system with a second RO system and blending the supplies to form the final treated water. The issue relates to the quality of product water produced, more than treatment function; as either approach is considered functional. Pre- and post-treatment approaches are similar. All incorporate granular media filtration of the incoming seawater, with PML following on with a low pressure membrane filtration system (microfiltration or ultrafiltration) to deal with the anticipated higher solids load from water extracted from Moss Landing Harbor. In the case of Cal-Am, the aquifer filtration provided by the slant wells could obviate the need for media filtration; but the potential presence of iron and manganese in the supply could just as well make them necessary—so the approach is considered conservative. In the case of DWD, the incoming seawater extracted at depth will be cold (roughly 15 °C) and warmed through a proprietary warming system at the Moss Landing Power Plant prior to transmission to the treatment plant site. All three proponents propose to use calcite beds, carbon dioxide and sodium hydroxide for re-mineralization/stabilization of the RO treated product water and chlorine disinfection. Cal-Am and-D-Wi) will require offsite pipelines for feed, product water and brine disposal; while PML proposes to use existing intake and outfall pipelines originating on site; requiring only a product water delivery pipeline. DWD's site location north of the Elkhorn Slough is likely to Fkr-ee-e two 36 in). DWD's co-located site at the Moss Landing Power Plant will permit it to connect to existing intake and outfall facilities; requiring only on off-site product water pipeline. All three proponents were cooperative with our original evaluation and provided all available and requested information. The Cal-Am project through past work on other regional projects as well as ongoing procedures with the California Public Utilities Commission has produced the most detailed information on their project, followed by DWD who have prepared a fair amount of predesign data on their proposed system along with active environmental investigations for January 2013 Page ES-3 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 82, Packet Page 108 Page ES-4 January 2013 EXECUTIVE SUMMARY MONTEREY PENINSLILA REGIONAL WATER AUTHORITY their proposed intake. PML is at a more preliminary level of engineering and planning in comparison. Their project has transitioned in ownership/proponents, with the new entity electing not to participate in this evaluation. Importantly however, we have not found any fatal flaws of a technical nature associated with any of the candidate projects. PROJECT PERFORMANCE Performance of each proposed system was gauged relative to categories of plant design capacity, targeted product water quality and disinfection strategy. For plant capacity, we considered the proposed instantaneous design capacity of each treatment facility in comparison to the required annual production increment—either 5,500 AFY or 9,000 AFY. What we found were wide variations—with Cal-Am proposing capacities of 5.4 mgd and 9.0 mgd; DWD of 4.9 mgd and 9.1 mgd; and PML at 4.8 mgd and 9.4 mgd. We considered the level of equipment redundancy proposed by each team in the context of the amount of "online" time it would require a facility at a given rated capacity to deliver the required annual allotment. For Cal-Am, we gauged their planned design capacities adequate considering the need to return flow to the SVGB as well as meet the 5,500 AFY or 9,000 AFY into their distribution system. At capacities of 5.4 mgd and 9.0 mgd, the plant(s) would need to operate 98 percent of the time to meet production—not overly conservative but achievable given the level of equipment redundancy (including spare process units) in their proposed facility. DWD, with similar proposed levels of redundancy, would have equivalent minimum facility capacity requirements of 5.0 mgd and 8.2 mgd; somewhat lower than Cal-Am as they lack the requirement to return flow to the SVGB. PML did not provide a detailed equipment list indicating numbers of process units; so gauging proposed levels of equipment redundancy was uncertain. However, we feel the facility should have adequate reliability and conducted our evaluation on that basis— recommending equivalent capacity ratings to DWD of 5.0 mgd and 8.2 mgd. The product quality produced by the proposed systems would differ based on the configuration of their proposed RO systems. Cal-Am's proposed partial two-pass system could likely achieve chloride, boron, and total dissolved solids (TDS) consistent with current Cannel River supplies; but the single pass systems would not. We consider a lower salinity product supply an asset and evaluated all three projects (from an economic perspective) as having partial two-pass RO systems. The recommended product quality goal is summarized in Table ES-1-1. Table ES-1-1 - Summary of Proposed Product Water Quality MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 83, Packet Page 109 MONTEREY PENINSULA REGIONAL WATER AUTHORITY EXECUTIVE SUMMARY For disinfection, the proposed facilities must comply with the Surface Water Treatment Rule and Long-Term 2 Enhanced Surface Water Treatment Rule. Under these regulations, pathogen removal/inactivation requirements are set on a logarithmic (log) scale, with the California Department of Public Health establishing specific log removal for priority pathogens, including giardia, cryptosporidium (crypto), and virus. The levels set will be based on source water quality and other factors, and are expected to be in the range of 3-5 for giardia, 2-4 for crypto, and 4-6 for virus, based on each of the project source waters being classified as surface waters or under the influence of surface waters. We find all three projects are likely to achieve sufficient log removal credits under their proposed treatment schemes to comply. ECONOMICS A primary focus of our evaluation was to provide a balanced, "apples to apples" comparison of the candidate projects from an economic perspective. We implemented this by focusing on the following principles: O Uniformity in plant design capacity for the two non-regional approaches; equivalent capacity allocation for the proposed DWD regional project. o Equivalency in treatment to achieve: a common RO feed water quality following pretreatment; a common treated water quality goal; and pathogen removal credits required for the applicable supply source. O Uniformity in equipment redundancy. O Uniformity in unit cost criteria for common items. O Uniformity in cost factors applied to aggregated costs (e.g., contingencies; electrical and I&C costs; etc.). o Uniformity in unit costs for chemicals and other consumables for treatment evaluations. To implement the above, we adjusted plant capacities for the evaluation on the basis described in the Project Performance discussion, rating Cal-Am's proposed system at design capacities of 5.4 mgd and 9.0 mgd; and the DWD and PML systems at 5.0 mgd and 8.2 mgd. In terms of treatment process, we attempted to maintain the overall proposed process design of the proponents, but did evaluate all as including a partial (40 percent) capacity second pass RO system. We also assumed N+1 redundancy on all rotating equipment and major treatment process units (e.g., filters, RO membrane trains). We employed an equivalent basis in developing our capital equipment cost estimates, relying on targeted quotes for equipment and SPIs cost information from past, similar seawater RO projects. For indirect costs, we assumed fixed factors and applied them uniformly to each project. We implemented a similar strategy on annual operating and maintenance expenses, using common chemical unit prices along with pricing on common consumables, such as the RO process membranes. The results of our evaluation are presented in Table ES-1-2. Legal and financial considerations, such as water rights and payment schedules (for example, Surcharge 2 proposed by Cal-Am) were outside the scope of this evaluation and are not addressed herein. Overall, the costs presented are meant for comparative evaluation on a planning basis. They have an overall accuracy level of -30 to +50 percent. (.5 CFDr- f January 2013 Page ES-5 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 84, Packet Page 110 EXECUTIVE SUMMARY MONTEREY PENINSULA REGIONAL WATER AUTHORITY Table ES-1-2 - Summary of Evaluated Capital and Operating Cost Estimates 1 -7 , 4.1.:Jfi*.. ..! ..e.-I ot ,, '..i, F1 , °,4-,' °IV 1 ',_ ;:- 1:0' ;''' s ;1_ :k5''' ` :;'. 1.7. 'Y:-‘ '. 4T.` 7 Millions 2012 Dollars) 4. -°- COSTS cri CAPITAL Intake/Outfall Facilities $23.0 $17.7 $-0- $-0- $-0- $-0- Pretreatment & Residuals Handling $10.6 $7.94 $11.2 $7.94 $20.2 $13.6 Desalination System $22.4 $15.0 $19.4 $13.2 $19.9 $14.0 Post-Treatment $1.48 $0.88 $1.48 $0.88 $1.66 $1.07 Distribution Facilities $6.14 $5.08 $3.35 $3.26 $0.35 $0.26 Site Structures $11.5 $10.8 $3.65 $2.52 $10.0 $7.00 Offsite Trenched Pipelines $24.9 $24.9 $23.0 $22.7 $25.1 $25.1 Indirect Costs1 $57.5 $50.3 $52.9 $42.7 $67.9 $62.3 Contingency Allowance (30%) $47.2 $39.8 $34.5 $28.0 $43.6 $37.0 Mitigation Allowance (1%) $1.60 $1.30 $1.20 $0.90 $1.50 $1.20 TOTAL $206 $174 $151 $122 $190 $161 ANNUAL O&M COSTS (in Millions 2012 Dollars) Energy . $5.38 $3.26 $3.44 $2.10 $3.98 $2.43 Chemicals $0.32 $0.19 $0.81 $0.49 $0.93 $0.57 Expendables $0.69 $0.45 $0.78 $0.52 $1.09 $0.65 Other Proponent Expenses - - $1.59 $1.45 - O&M Labor $2.69 $2.36 $2.69 $2.36 $2.69 $2.36 Equipment Replacement2 $1.50 $1.23 $0.93 $0.76 $1.16 $0.92 TOTAL $10.6 $7.49 $10.2 $7.68 $9.85 $6.93 ANNUAL COST OF WATER (in Millions 2012 Dollars) Capital Recovery3 $19.1 $16.2 $8.73 $7.06 $11.0 $9.37 Total Annual Cost $29.7 $23.7 $18.9 $14.7 $20.9 $16.3 Production Cost of Water ($/A9 4 RANGE ($/AF) $3,300 $2,310- $4,950 $4,310 53,017-55,465 $2,100 $1,470-53,150 $2,670 $1,870 -$4,005 $2,320 51,625- $3,480 $2,965 $2,075 -54,450 Includes implementation costs at 25%; ROW easement/land costs, mobilizationidemobilization at 2%; electrical and l&C systems at 18%; engineering and startup at 15%; and additional project proponent prescribed costs. All percentages applied to plant facilities costs. 2 Calculated as 1.5% of plant facilities costs. 3 Capital recovery factor for DWD and PML based on an interest rate of 4.0% and term of 30 years; based on an interest rate of 8.49% and 30 years for Cal-Am; see additional discussion in Section 5. 4 0verall accuracy of costs is estimated at AACE Class 5 with an accuracy of -30% to +50%; range values indicate potential spread. Page ES-6 January 2013 c- 501 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 85, Packet Page 111 MONTEREY PENINSULA REGIONAL WATER AUTHORITY EXECUTIVE SUMMARY Overall, the projected capital and operating costs for each facility are fairly equivalent given the overall accuracy of the estimate and degree of project development. Cal-Am's capital cost is the highest; owing largely to its high intake system cost. PAIL is proposing to reuse existing intake infrastructure; while DWD has an unspecified separate business entity which will be funding its intake, outside of the assigned DWD facility budget. Cal-Arn's operating cost is also relatively high, owing in large measure to higher stipulated energy costs than either DWD or PML- roughly $0.13/kW-hr vs. $0.08 kW-hr. However, Cal-Am has recently indicated they may be able to secure lower power through a direct purchase agreement with PG&E, resulting in a cost of $0.087/kW-hr. The potential impact of this change is addressed in a sensitivity analysis for Cal-An-i's costs in Section 5. The overall water production costs diverge considerably in our evaluation, due to the higher cost of capital assigned to Cal-Am vs. DWD and PAIL; so while the base costs are similar, Cal-A_m's cost of water produced is higher. An expanded discussion of how the capital recovery factor (CRF) for Cal-Am was generated is presented in Section 5. IMPLEMENTATION CONSIDERATIONS The three projects are at varying states of development in terms of the regulatory permitting process. Cal-Am is further along than either DWD or PML, though DWD has completed or is nearing completion of their initial CEQA compliance documents. Forecast project implementation schedules were identified for each project proponent, based on a select number of key environmental and permitting tasks, including: 1. A project description must be completed. 2. An Environmental Assessment must be made. 3. An ElR/EIS must be completed (CEQA/NEPA compliance). 4. Commercial Agreements must be negotiated/ Cal-Am must obtain a Certificate of Public Convenience and Necessity (CPCN), after certification of the EIR. 5. Jurisdictional Permits must be obtained for facilities impacting Waters of the U.S. 6. NPDES Permits must be amended/obtained. 7. Coastal Development Permits must be obtained. It was further assumed that each proponent had the financial capacity to proceed with predesign preparation/procurement package development such that the project could be put out to final design and construction bid coincident with approval of the final project permits. The schedules are provided below as Figure ES-1, Figure ES-2 and Figure ES-3. The project proponents were invited to provide their updated schedules following publication of the draft report. Cal- Am and DWD each elected to provide a schedule, which are included in Section 6. (t.SPl i) January 2013 Page ES-7 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 86, Packet Page 112 26-17 201E -;2110, EXECUTIVE SUMMARY MONTEREY PENINSULA REGIONAL WATER AUTHORITY Figure ES-I - Projected Cal-Am Project Implementation Schedule Figure ES-2 - Projected DWD Project Implementation Schedule ID DWD ._ rcf.. -4Tiis, 241)17 ? _'.,gc) .1' Complete EIR/E1S I Negotiate Commercial Agreements II NPDES Permit Amendment Coastal Development Permit _ ii .5] -1 Desal Plant Preliminary Design -Lai---- I1 Desel Plant Design/Construction II _Desal Plant Startup Figure ES-3 - Projected MIL Project Implementation Schedule Complete EIR/EIS Negotiate Commercial Agreements .NI5 1 0 ES Pe.rmit'Aniendment f coastal Development Permit I N'sal Plant PreliniinarY Design 1 Desal,Plant DeSign/Censtruction 1 Desal Plant Startup Page ES-8 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 87, Packet Page 113 MONTEREY PENINSULA REGIONAL WATER AUTHORITY INTRODUCTION INTRODUCTION Separation Processes Inc. (SPI) and Kris Helm Consulting (KHC) are providing engineering and consulting support to the Monterey Peninsula Regional Water Authority (MPWRA) to assist with the evaluation of three candidate desalination projects on the Monterey Peninsula. SPI conducted technical and economic evaluations of the proposed projects; while K_HC examined issues relating to permitting and environmental compliance. California American Water (Cal-Am) is an investor owned public utility who is responsible for providing the water supply to cities covered within the MPRWA—Carmel-by-the-Sea, Del Rey Oaks, Monterey, Pacific Grove, Sand City and Seaside. The proposed projects would supplement supply previously extracted for the region from the Cannel River. In 1995, the State Water Resources Control Board (SWRCB) in its Order No 95-10 found that Cal-Am was withdrawing water from a subterranean stream, rather than percolating groundwater; and in the process extracting an average of 10,730 AFY in excess of its valid right of 3,376 AFY. The order required Cal-Am to secure a replacement source of supply by December 2016. The average annual water demand in the region is 15,250 AFY I . Currently identified sources include established rights to Cannel River and Seaside Basin waters of 4,850 AFY, the aquifer storage and recovery (ASR) system of 1,300 AFY, and 94 AFY from the Sand City Desalination Plant. This leaves a roughly 9,000 AFY deficit to be made up. Alternatives include a new 9,000 AFY seawater desalination plant; and a new groundwater replenishment (GWR) project of 3,500 AFY in combination with a new 5,500 AFY seawater desalination plant. The technical advisory committee (TAC) of the MPRWA developed a list of 56 questions to submit to the three desalination project proponents, including Cal-Am, Deep Water Desal, LLC (DWD) and the Peoples' Moss Landing Desal (PML). Each proponent is proposing to build a desalination facility to satisfy the planned desalination component of the regional water supply. Responses and supporting information were received from each, exhibiting various stages of development and differences in approach. The differences were such that a deliberative, fair comparative evaluation could not be conducted solely on the basis of the information provided. This report presents the results of a more detailed evaluation and analysis conducted by SPI and K_HC. The work was conducted based on information provided in the original responses to the questions from the TAC along with supplemental information provided by each proponent. The goal was to provide an "apples-to-apples" comparison of each project on an equivalent cost basis; along with an evaluation of the realistic implementation schedule for each, taking into account environmental and permitting issues. RBF Memorandum, Recommended Capacity for the Monterey Peninsula Water Supply Project (MPWSP) Desalination Plant, April 20, 2012 January 2013 Page 1-1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 88, Packet Page 114 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 89, Packet Page 115 MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECT SUMMARIES 2 PROJECT SUMMARIES The tabular summaries provided in this section include information on each of the proponent projects, including: O Project name • Proponent(s) o Location O Purpose o Production volume o Key features o Facility map • Key information provided to review team o Persons interviewed/corresponded with The TAC requested information from each proponent that would satisfy the desalination component of the proposed water supply. Responses received from the Cal-Am and PML groups were generally in line with this request; though there were slight differences in the proposed plant capacities. The DWD response proposed to only serve the higher 9,000 AFY requirement, along with a planned expansion to act as a regional water supply source to other agencies on the peninsula as well as cities north of Moss Landing. DWD did reveal in response to subsequent inquiries how they would serve the 5,500 AFY supply scenario. The information presented for each project represents their current status from the proponents at the time of this report writing. January 2013 Page 2-1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 90, Packet Page 116 PROJECT SUMMARIES MONTEREY PENINSULA REGIONAL WATER AUTHORITY 2.1 CALIFORNIA AMERICAN WATER (CAL-AM) Key Information Provided Persons Interviewed/Corresponded With Monterey Peninsula Water Supply Project (MPWSP) California American Water 46-acre site of vacant, disturbed land west of the MRWPCA Regional Treatment Plant (RTP). To supply supplemental desal component of the Monterey Peninsula regional water supply This project is currently under consideration by the California Public Utilities Commission (CPUC). 5.4 mgd or 9.0 mgd 1. Raw seawater supply through a series of up to eight sub-surface slant wells located on a vacant 376 acre parcel with roughly 7,000 feet of ocean shoreline. 2. Raw water and pump to waste transmission through one of eight candidate alignments. 3. Single-stage, dual media pressure filtration pretreatment. 4. Partial 2-pass RO desalination treatment with energy recovery. Final product has a proposed blend of 60:40 first pass:second pass product. 5. Product stabilization with calcite, carbon dioxide, and sodium hydroxide. 6. Disinfection with sodium hypochlorite and temporary UV. 7. 2 x 1.0 MG product storage tanks, product distribution pumps, and 36-in diameter product pipeline to Cal-Am distribution system near Seaside. 8. 24-in brine disposal pipeline to the existing RTP outfall. 1. TAC response package 2. Response to supplemental questions from SPI and KHC 3. Relevant testimony to the CPUC 4. RBF 2011 memo on implementation schedule risk of regional supply alternatives 5. RFB 2011 memo on cost analysis of regional supply alternatives Richard Svindland Project Name Proponent(s) Location Purpose Production Volume Key Features Page 2-2 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 91, Packet Page 117 MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECT SUMMARIES Figure 2-1— Cal-Am Project Location Map Slant Well Intake Brine Product Water Desalination Plant Tie-in to CAL AM existing facilities January 2013 Page 2-3 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 92, Packet Page 118 PROJECT SUIVIMARIES MONTEREY PENINSULA REGIONAL WATER AUTHORITY Deep Water Desal DeepWater Desal, LLC, Dynegy Moss Landing Power Plant, METK Partnership of the Capurro Ranch, PV2 Solar, and Ecomert Technologies G3 Data Centers Capurro Ranch Property, north of /Elkhorn Slough Moss Landing Power Plant Phase 1 to supply supplemental desal component of the Monterey Peninsula regional water supply; Phase 2 to supply northern customers Phase 1: 4.9 mgd or 9.1 mgd Phase 2: 22.0 mgd 1. Raw seawater supply through a new 48-in open intake extending into the Monterey Bay west of Moss Landing at a depth of roughly 65-ft. 2. Raw water transmission through an existing right of way maintained by MLPP to an existing pump station at MLPP for transfer to the site. 3. Proprietary warming system at MLPP which will increase the temperature of the raw water. 4. Transmission of the warmed feed water through a new 36 in pipeline to the Capurro Ranch site. 5. Single-stage, dual media pressure filtration pretreatment. 6. Single-pass RO desalination treatment with energy recovery. 7. Product stabilization with calcite, carbon dioxide, and corrosion inhibitor. 8. Disinfection with sodium hypochlorite. 9. 2.5 MG product storage tank, product distribution pumps, and 30-in diameter product pipeline to Cal-Am distribution system. 10. 36-in brine disposal pipeline to MLPP existing cooling water ocean discharge. 1. TAC response package 2. Response to questions from SPI/ KHC 3. Tenera Environmental, Preliminary Modeling of Potential Impacts from Operation of a Desalination Facility Ocean Intake, August 22, 2012 22 DEEPWATER DESAL (DWD) Project Name Proponent(s) Location Purpose Production Volume Key Features Key Information Provided Persons Interviewed/Corresponded With Dennis Ing, Scott Jackson, Jonathan Dietrich Page 2-4 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 93, Packet Page 119 MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECT SUMMARIES Figure 2-2 — DWD Project Location Map Intake Brine Product Water o Desalination Plant 0 Tie-in to CAL AM existing facilities January 2013 Page 2-5 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 94, Packet Page 120 PROJECT SUMMARIES MONTEREY PENINSULA REGIONAL WATER AUTHORITY 2.3 PEOPLES MOSS LANDING (PML) Project Name Proponent(s) Location Purpose The People's Moss Landing Water Desal Project DeSal America, LLC composed of Moss Landing Commercial Park, LLC; and Stanley and Patricia- Vance Lueck Moss Landing Commercial Park To supply supplemental desal component of the Monterey Peninsula regional water supply This project is currently proposed as alternative to the Cal-Am MPWSP. Production Volume 4.8 mgd or 9.4 mgd Key Features 1. Raw seawater supply through an existing intake system drawing from the Moss Landing Harbor. 2. Single-stage, zeolite pressure filtration followed by ultrafiltration (LTF) pretreatment. 3. Single-pass RO desalination treatment with energy recovery. 4. Product stabilization with calcite, carbon dioxide, and sodium hydroxide. 5. Disinfection unspecified, but presumed to be with sodium hypochlorite. 6. Product storage in existing site tankage. New distribution pump station and 36-in diameter product pipeline to Cal-Am distribution system near Seaside. 7. Brine disposal through existing 51-in (internal diameter) outfall. Key Information Provided 1. TAC response package 2. Project information package dated July 2012 3. Response to supplemental questions from SPI and KHC 4. Video of a portion of the existing outfall. 5. August 2012 Structural Evaluation Report of site structures and outfall, conducted by JAMSE Engineering, Inc. 6. Construction drawings for the outfall (1973) and modifications made to the intake pump station (1968). 7. September 2012 Environmental Issues and Constraints Report by SMB Environmental Inc. Persons Interviewed/Corresponded With Nader Agha, George Schroeder, Stanley Luecic Page 2-6 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 95, Packet Page 121 Figure 2-3 — PIVIL Project Location Map Intake Brine Product Water 0 Desalination Plant Tie-in to CAL AM existing facilities MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECT SUMMARIES January 2013 Page 2-7 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 96, Packet Page 122 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 97, Packet Page 123 MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECT FUNCTION 3 PROJECT FUNCTION The function of each proponent project is evaluated on the following criteria: o Project purpose o Customers identified O Adequacy of treatment approach O Residuals handling • Feed water characterization O Quality of project information o Omissions or fatal flaws In an initial screening level evaluation2, we found no disqualifying criteria for any of the candidate projects. We did however find differences in the level of project development and approach. Each project is discussed separately below. 3.1 CALIFORNIA AMERICAN WATER (CAL-AM) 3.1.1 Project Purpose Cal-Am proposes their project to serve the needs of the identified demand on the Monterey Peninsula within their service area to comply with SWRCB Order 95-10. The proposed treatment plant would serve the identified desalination component of the regional water supply portfolio. They specifically do not propose to provide a plant capacity in excess of defined regional water supply requirements under two scenarios—with GWR and without GWR3 . 3.12 Customers Identified Treated water would be supplied to the Cal-Water distribution system for service to its current service area. Any groundwater from Salinas Basin drawn through the proposed supply wells would be returned the basin as plant treated water through the Castroville Seawater Intrusion Project (CSIP) ponds3 . 3.1.3 Adequacy of Treatment Approach Feed water for the desalination plant would be extracted from subsurface slant wells. Over the long term, feed water is projected to include about 97 percent seawater and 3 percent intruded groundwater from the Salinas Valley Groundwater Basin (SVGB) 3 . The desalination plant will be operated such that on an annual average basis, the plant would return desalinated water to the SVGB in an amount equal to the freshwater extracted from the slant wells. 2 SPI Memorandum, Monterey Desalination Study — Initial Scoping and Constraints Analysis, August 30, 2012 3 Direct Testimony of Richard C. Svindland Before the Public Utilities Commission of the State of California, filed April 23, 2012 (SP - .1).0 January 2013 Page 3-1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 98, Packet Page 124 PROJECT FUNCTION MONTEREY PENINSULA REGIONAL WATER AUTHORITY The preferred site for construction of the slant wells is an approximately 376 acre parcel of land with 7,000 feet of ocean shoreline, located west of the proposed desal plant site. The angle of the slant wells will be determined by a proposed test well program, with a maximum well length of approximately 750 lineal feet. Wells would initially be placed on the beach, as far as possible from the existing shoreline, but avoiding undisturbed dune habitat. This may cause some or all wells to be within the predicted 50-year erosion boundary; however, the expected useful life of the wells is less than 50 years. A contingency plan will be needed for relocating the wells inland in the event that coastal erosion renders the wells inoperable 4. Two design capacities are proposed: (1) seven wells operating at 2,200 gpm per well plus one additional well as a backup, for a total of 22 mgd (15,400 gpm) producing 9.0 mgd of product water; (2) five wells operating at 1,840 gpm per well plus one additional well as backup, for a total of 13.2 mgd (9,200 gpm) producing 5.4 mgd of product water 4. Eight feed water pipeline alignments are being considered, all of which will be made of FIDPE or FPVC, and will have a 30-inch or 36-inch diameter. The final selected alignment would include a parallel 16-in diameter pump to waste pipeline, to allow wasting of initial produced water from a pump following startup. The proposed treatment plant would be located on a vacant but disturbed 46-acre parcel west of the MRWPCA Regional Treatment Plant (RTP). The site would be accessed off of Charles Benson Rd., a two-lane roadway that also serves the MRWPCA RTP along with the Monterey Regional Waste Management District. Access would be via an easement from the Waste Management District. A new turn lane would need to be provided to allow safe access to the proposed desal plant for personnel and chemicals deliveries. Cal-Am is currently in negotiations to purchase the site from the existing land owner. Overall, land acquisition is not a large concern as Cal-Am has the authority to exercise eminent domain privileges should a negotiated purchase prove untenable. Incoming seawater would be stored in two 0.5 MG storage tanks then pumped to granular media pressure filters. Provisions would be included to pre-chlorinate the filter feed if necessary; as well as include proprietary media to remove iron and manganese should it be present in the raw seawater. Filter effluent would be dechlorinated if necessary, then flow to inline cartridge filters prior to routing to the RO trains. The proposed RO system would be arranged as a full single pass and partial second pass; with the second pass product making up 40 — 50 percent of the final product supply. The first pass trains would include high pressure booster pumps and isobaric energy recovery devices (ERDs); while the second pass trains would be equipped with high pressure booster pumps only. Operating recovery of the first pass trains would be roughly 45.5 percent; while the second pass trains would operate at 90 percent. First and second pass trains, related pumps, and ERDs would be arranged in an N+1 configuration, with a total of four process trains for the 5.4 mgd plant option and six process trains for the 9.0 mgd plant option. 5 The product water from the RO system would be post-treated with calcite and carbon dioxide for stabilization, along with addition of a corrosion inhibitor. For disinfection, the product would be dosed with sodium hypochlorite and stored in two, 1.0 MG storage tanks. Provisions may be included for a temporary or permanent UV disinfection system as well, should conditions warrant (e.g., if additional disinfection credits are required). 5 4 RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project Description, April 20, 2012 5 Cal-Am Response to SPI Questions, October 3, 2012 Page 3-2 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 99, Packet Page 125 MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECT FUNCTION Overall the treatment approach is gauged to be sound. The greatest process risk is likely associated with the proposed slant wells. Slant well intake systems can provide significant advantages over traditional open ocean intakes including: • Natural filtration o Avoidance of impingement and entrainment of marine life o No ocean construction impacts o No permanent aesthetic impacts. However, slant wells can also pose more construction challenges than other well types as a result of shallow construction angles and less vertical gravitational force. Slant wells need periodic access to the well head area. In areas where recreation exists (e.g., at a public beach) provision must be made to minimize disturbance6 . Slant well intakes can be used with large desalination plants, with seawater intake capacities of up to 50 mgd 7 . Maintenance of well specific capacity long term is unknown; and elsewhere where employed the wells have been known to initially draw from an ancient marine aquifer containing high levels of iron and manganese s. Lastly, the specific long term amount of groundwater uptake from the SVGB, estimated at up to 3 percent, is uncertain. Cal-Am plans to install a test slant well to establish site specific operating conditions and generate data which should help to confirm actual conditions and allow development of appropriate mitigation strategies. Cal-Am has already included provisions for removing iron and manganese across their pretreatment filters if necessary. The slant wells themselves can be screened or installed at different angles to control the mix of seawater to diluent water extracted. Cal-Am is currently pursuing permits for the test well. An initial operating period of 6 — 12 months is planned to develop data required for the ELR CEQA work. Cal-Am has indicated that the test period could extend as long as 18-24 months if additional data is required 5 . Should the test well reveal slant wells to be problematic, a more conventional Ranney sub-surface intake well could be used as an alternative. The conceptual layout would include three vertical caissons and horizontal well clusters located across a 1,000 — 1,500 feet beach front area. Each caisson would be capable of extracting up to 10 mgd. Costs would roughly equivalent to the proposed slant wells; however, shoreline disruption would be greater. To help gauge the potential cost impacts of shorter-than anticipated life of the slant wells, a cost sensitivity analysis is provided in Section 5. With either intake system, delivered raw seawater quality is likely to be good, with low particulate and silt density index (SDI) levels, making single-stage filtration an acceptable pretreatment approach. The RO process design is conservative, with a full first pass and partial second pass; including N+1 redundancy for all process units. The proposal does not include acidification or antiscalant dosing to the first pass RO system feed water, but this is likely 6 Williams, D.E. — Design and Construction of Slant and Vertical Wells for Desalination Intake. IDA World Congress-Perth Convention and Exhibition Centre (PCEC) — Perth, Western Austrailia September 4-9, 2011 — REF: IDAWC/PER11-050 7 Panlcratz, T. — A Review of Seawater Desal Intake, Pretreatment & Discharge Technologies. IDA —Iran 06 \VDTS Proceedings September 17 & 18, 2006 8 Ghiu, S. — 18 Month Demonstration of Slant Well Intake System Pretreatment and Desalination Technology for Seawater Desalination. WaterReuse Research Conference Proceedings, June 2012. January 2013 Page 3-3 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 100, Packet Page 126 PROJECT FUNCTION MONTEREY PENINSULA REGIONAL WATER AUTHORITY acceptable as the planned recovery of the first pass system is limited to 45 percent. Feed and product storage tanks are arranges as 2 x 50 percent units, allowing the ability to take a tank out of service for maintenance. A preliminary site plan indicates the proposed site is sufficient to accommodate the proposed treatment plant facilities and related administrative and maintenance facilities adequately. 3.1.4 Residuals Handling Plant residuals would be handled in a combination of storage and transfer systems. Bacicwash waste from the filters would be collected in a 0.5 acre storage pond, with decant disposed with the RO brine. RO brine would be sent to the MRWPCA ocean outfall. Analyses have shown that the outfall has sufficient capacity to accommodate the projected peak brine flow from the plant under all but a worst case hydraulic loading scenario that is anticipated to last for six hours9 . In these situations, brine would temporarily be stored on site in a 3.0 MG detention pond. The majority of the time (96 percent) the outfall is projected to have sufficient capacity. Waste residuals from the RO cleaning system would be neutralized and discharged with the brine to the outfall as well; or alternately to the site sanitary sewer if disposal with the brine is not permitted. 3.1.5 Feed Water Characterization There has been no detailed characterization of plant feed water to date. Data will be generated as part of the planned test well program. 3.1.6 Quality of Project Information Available documentation for the Cal-Am project is the most extensive and well developed among the three proponents. Primarily this is a consequence of their involvement in the previously proposed regional project with Marina Coast Water District along with filings to the CPUC supporting their proposed project and development of required CEQA documentation. Appendices to their response to the TAC included the following: O RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Capital and O&M Cost Estimate Update, April 20, 2012. O RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project Description, April 20, 2012. O Direct Testimony of Jeffrey T. Linam Before the Public Utilities Commission of the State of California, Filed April 23, 2012. Other project related documents were available on the Monterey Peninsula Water Supply Project website, including: 9Trussel Technologies Inc. Technical Memorandum, MRWPCA Outfall Hydraulic Capacity Analysis, April 18, 2012. Page 3-4 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 101, Packet Page 127 MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECT FUNCTION O California America Water Company, Coastal Water Project, Final Environmental Impact Report, October 30, 2009. O Download Filings for Proceeding A1204019 O Presentations, including Technical Workshops on Monterey Peninsula Water Supply Project (July 2012); Monterey Peninsula Water Supply Project Presentation (April 2012); and Monterey Peninsula Water Supply Project Presentation (July 2012). O Project Map (April 23, 2012). O California American Water Application for Monterey Project (PDFA) O California American Water Application for Monterey Project (POS, NOA,PDFA) O California American Water Direct Testimony of Keith Israel, including a Technical Memo from Trussell Technologies, MRWPCA Outfall Hydraulic Capacity Analysis, April 18, 2012 O California American Water Direct Testimony of Jeffrey T. Linam O California American Water Direct Testimony of Eric J. Sabolsice O California American Water Direct Testimony of F. Mark Schubert, P.E. o California American Water Direct Testimony of David P. Stephenson O California American Water Direct Testimony of Richard C. Svindland o California American Water Direct Testimony of Kevin Thomas Cal-Am also provided a response to questions from SPI, including the following documents: O Capital Cost Worksheet O O&M Cost Worksheet O RBF Memorandum, Implementation Schedule Risk Analysis of Water Supply Alternatives, October 24, 2011 • RBF Memorandum, Cost Analysis of Water Supply Alternatives, October 19, 2011 Overall the information is considered sufficient to evaluate the proposed project from a technical and economic perspective. 3.1.7 Omissions or Fatal Flaws Our evaluation and investigation of the proposed Cal-Am project did not uncover any perceived fatal flaws of a technical nature or significant omissions of project information. tt- k January 2013 Page 3-5 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 102, Packet Page 128 PROJECT FUNCTION MONTEREY PENINSULA REGIONAL WATER ALITHORITY 32 DEEPWATER DESAL (DWD) 3.2.1 Project Purpose DWD proposes a project that could serve both the defined demand within the Cal-Am service area for a desal supply of either 5,500 AFY or 9,000 AFY along with an expanded supply for the region with a total plant capacity of 25,000 AFY. The project is predicated on development of certain components (e.g., the seawater intake, feed pipeline, brine pipeline) for the 25,000 AFY plant, with cost allocation based on treated water flow to defined customers. DWD plans to establish a joint powers authority (WA) composed of local public agencies to ultimately prosecute its project. 3.2.2 Customers Identified DWD seeks to supply either 5,500 AFY or 9,000 AFY to Cal-Am. The balance of the proposed plant capacity would be supplied to other customers. These may include the City of Santa Cruz, Soquel Creek Water Distict, Pajaro Valley Water Management Agency, areas of North Monterey County which may have a need and communities along the Highway 101 corridor between Salinas and Santa Clara. 3.2.3 Adequacy of Treatment Approach DWD proposes two plant design capacities to meet the 5,500 AFY and 9,000 AFY delivery targets-4.9 mgd and 9.1 mgd. Each of these capacities is different than the Cal-Am listed flows of 5.4 mgd and 9.0 mgd, respectively. DWD proposes a new passive-screened open seawater intake drawing from Monterey Bay near Moss Landing. Feed water would be withdrawn from a new 48-in, diameter pipe that would replace an existing pipeline previously used by PG&E for offloading fuel oil. The intake pipe would be 10,000 feet long and located at a depth of approximately 65-ft at its end. The pipe terminus would be screened with a passive, cylindrical wedge-wire screen constructed with 2 mm. slot openings and a maximum design velocity of 0.5 fps through the screen to prevent impingement of marine organisms. The intake would cross Hwy. 1 through an existing utility tunnel; or space not permitting, a new crossing. The line would connect to an existing, abandoned pump clear well at the Dynegy Moss Landing Power Plant (MLPP). New pumps would be installed to transfer the influent seawater from the clear well through a new 48-in diameter HDPE pipeline to the project site located roughly one mile north of MLPP along Hwy. 1, a location known as the Capurro Ranch treatment facilities located on the MLPP site. En route to the site treatment plant, the water would transition through a proprietary warming system owned by Dynegy, increasing its temperature from roughly 10 °C up to as high as 31 26 °C. with an option to extend it for two successive 32 year period.). The site area is 8.11 acres; and D-WP FietH- 61 additional area be required for plant construction The project facilities would be located in an existing, abandoned structure that previously housed electrical generating equipment, co-located with a planned data center; or alternately on available, open property on the Dynegy site. Page 3-6 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 103, Packet Page 129 MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECT FUNCTION No feed water storage tanks are proposed, with the supply pumped directly to granular media pressure filters. Provisions would be included to pre-chlorinate the filter feed if necessary; as well as include a filter aid coagulant (ferric chloride). Filter effluent would be dechlorinated if necessary, then flow to inline cartridge filters prior to routing to the RO trains. The proposed RO system would be arranged as a single pass system. The trains would include high pressure booster pumps and isobaric ERDs. Operating recovery of the first pass trains would be variable between 43 and 47 percent. The RO trains, related pumps, and ERDs would be arranged in an N+1 configuration, with a total of three process trains for the 4.9 mgd plant option and six process trains for the 9.1 mgd plant option. lcl The product water from the RO system would be post-treated with calcite and carbon dioxide for stabilization. For disinfection, the product would be dosed with sodium hypochlorite and stored in a single 2.5 MG storage tank. Overall the treatment approach is gauged to be sound, though the proposed RO system design would produce a lower quality product than the proposed Cal-Am system, consisting solely of a single pass of RO treatment. The greatest process risk is likely associated with the proposed open intake and feed water delivery system. Water quality sampling conducted at depth has indicated the raw seawater will likely be low in turbidity and suspended solids. This is backed up by available literature. Intake depth can have a significant impact on water quality. Sun rays are absorbed by the ocean surface, limiting photosynthesis and algae quantity as depth increases. It is for this reason that deep water intakes typically provide feed water with less biological activity and fewer suspended solids than conventional open water/surface intakes. However, the disadvantage is that seawater temperature decreases with depth, increasing either membrane surface area or feed pressure required for treatment. On the other hand, more stable annual temperatures at this depth may facilitate plant design and operation l I . To address the temperature issue, DWD has proposed warming the supply in proprietary system on the MiLPP site. The proposed system is subject to a non-disclosure agreement at present, limiting the publicly available information. However, it appears the system will likely be integral to operations at the MLPP, providing a cooling water source. The approach is certainly synergistic, but it also in effect links operations between MLPP and the desal plant to a certain extent, introducing potential reliability issues. In addition, there is no experience with the effect of warming a deep source supply. There is potential for the increase in temperature to cause an increase in biological activity and associated biological fouling within the treatment process. There is no way to gauge the potential magnitude of this risk element at this time. The DWD project proponents do not consider it a large concern and have not proposed a pilot test program on the candidate source water and overall pretreatment process. The issue becomes what would be the impact of a problem discovered once the project was built? Remedies may be limited if the warming process is contingent on an agreement between Dynegy and DWD. If the warming process could be bypassed, then the issues with cold water treatment would come into play, increasing RO system operating pressures and potentially exceeding operating capabilities of installed pumping equipment. I° DWD Response to SPI Questions, September 12, 2012 II Cartier G., Corsin P. - Description of Different Water Intakes for SWRO Plants. IDA World Congress- Maspalomas, Gran Canaria —Spain October 21-26, 2007- REF: IDAWC/MP07-185. c 170 1, January 20 13 Page 3- 7 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 104, Packet Page 130 PROJECT FUNCTION MONTEREY PENINSULA REGIONAL WATER AUTHORITY The RO process design from an operations perspective is conservative, with N+1 redundancy for all process units. There is no proposed feed storage tank, which is considered acceptable; but the lack of any type of redundancy in product storage is a concern; as any required maintenance on the tank would necessarily require a shutdown of the treatment facility unless suitable temporary storage could be obtained. A preliminary site plan DWD indicates the proposed site is sufficient to accommodate the proposed treatment plant facilities and related administrative and maintenance facilities adequately. From a process perspective, the proposed pretreatment system design is likely acceptable. There is sufficient precedence for single stage filtration on open seawater intakes among successfully operating facilities to provide confidence in this approach 12 . The proposal does not include acidification or antiscalant dosing to the first pass RO system feed water, but this is likely acceptable if recovery is limited to the proposed operating range. A larger concern is with the RO system process design as a single pass system which would produce a treated product supply with TDS, boron and chloride levels above the existing supplies from the Carmel River. It is our recommendation that any desalination system incorporating RO as the primary process for Peninsula customers include a partial (at least 40 percent) second pass RO system to further improve product quality, especially at the elevated temperature operation proposed. 3.2.4 Residuals Handling Backwash waste from the filters would be collected in a 175,000 gallon settling tank, with decant sent to a separate 150,000 gallon tank for disposal along with the RO brine. RO brine would be sent to back to the existing MiL,PP outfall for disposal along with the plant cooling water through their existing ocean outfall at a projected dilution ratio between 20 and 60 to 1. DWD also proposes to neutralize chemical cleaning wastes and dispose of them with the brine as well. During our site visit it was made clear that an agreement between DWD and Dynegy for use of the cooling water outfall was still subject to negotiation among the parties. 3.2.5 Feed Water Characterization DWD has a buoy in the area of the proposed intake collecting data on salinity, temperature and turbidity at fixed intervals. Comprehensive analytical data is not available at this time. DWD has retained Tenera Environmental to conduct a 12 month study on impingement and entrainment issues. Sampling in support of the study is ongoing. Tenera did conduct a preliminary analysis based on available information and a proposed intake flow of 25 mgd. That report found low projected levels of entrainment. However, additional more detailed analyses are required based on site specific data; in particular to assess the presence of a large, vertical mixing zone at the interface of the submarine canyon in the bay 13 . 3.2.6 Quality of Project Information Available documentation for the DWD project is adequate at this stage of project development. DWD has not yet progressed with their formation of a joint powers authority (JPA) for project implementation and production of environmental permitting packages. Information collected to 12 DWD Response to SPI Questions, September 8, 2012. Tenera Environmental, Preliminary Modeling of Potential Impacts from Operation of a Desalination Facility Ocean Intake, August 22, 2012. Page 3-8 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 105, Packet Page 131 MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECT FUNCTION data has largely been in service of defining the project approach, securing agreements, and developing project cost estimates. The nature of the agreement between DWD and Dynegy is still confidential between the parties. A listing of documents provided in addition to the response to the TAC is as follows: O Product Water Pipeline Alignment O Intake Pipeline Hydraulic Grade Line O Draft Design Criteria • Tenera – Preliminary Intake Assessment O Conductivity, Temperature and Turbidity Data May 30 – June 12, 2012. O Raw Water Characterization Program Memo O Capital and O&M Cost Estimate Worksheets O Site Layout for Capurro Ranch O Presentation: An Oceanographic Solution to Product Freshwater, August 2012 Overall the information is considered sufficient to evaluate the proposed project from a technical and economic perspective. 3.2.7 Omissions or Fatal Flaws We have not identified any fatal flows of a technical nature with the DWD proposed system. The only omissions of information are acknowledged by DWD and related to the agreements between DWD and Dynegy. 32 PEOPLES MOSS LANDING (PML) 3.3.1 Project Purpose PML proposes a project that could serve the defined demand within the Cal-Am service area for a desal supply of either 5,500 AFY or 9,000 AFY. 3.3.2 Customers Identified PML seeks to supply either 5,500 AFY or 9,000 AFY to Cal-Am. Supply to other customers is not proposed. 3.3.3 Adequacy of Treatment Approach PML proposes two plant design capacities to meet the 5,500 AFY and 9,000 AFY delivery targets-4.8 mgd and 9.1 mgd. Each of these capacities is different than the Cal-Am listed flows of 5.4 mgd and 9.0 mgd, respectively. The difference results from their targeting deliveries of January 20 13 Page 3- 9 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 106, Packet Page 132 PROJECT FUNCTION MONTEREY PENINSULA REGIONAL WATER AUTHORITY 5,000 AFY and 10,000 AFY in their response to the TAC and subsequent information provided to SPI. PML proposes to use an existing seawater intake system originally installed to serve the Kaiser Refractories Moss Landing Magnesia Plant back in 1968—the same site that is now called the Moss Landing Commercial Park (MLCP). The pump station draws from the Moss Landing Harbor and supplies water to the site through two 36-in diameter pipelines that cross beneath Hwy. 1 through a pair of 72-in corrugated steel conduits. One of the pipelines has been upgraded to steel throughout its length; while the second maintains a section of the original wood staved piping on site. Proponents have also indicated the ability to repurpose the existing site seawater outfall as dual intake-outfall conduit extending into the Monterey Bay out front of Moss Landing Harbor. The existing concrete outfall is 51-in internal diameter; and could have a new intake line installed in the annular space; with brine flowing out in the opposite direction. Cost estimates provided to SPI were based on use of the existing intake system so this approach forms the basis of our evaluation. The 1968 drawings show the installation of seven pumps. The condition of the pumps at this time is unknown; but would likely require rehabilitation and rework to supply the proposed treatment plant. The pump bowls reportedly draw from below the harbor seafloor, but the actual depth is unknown. The MLCP site still contains infrastructure from the time it was employed as a magnesium extraction facility. The total site occupies roughly 200 acres; with a proposed 25 acre parcel offered for sale or lease as part of the proposed desal treatment plant. Available facilities offered for use include the following: o Intake pumps and pipeline and outfall pipeline. o Up to four 5.0 MG concrete storage tanks. o A 121cV, 12,000 amp electrical service along with two 1,000 amp engine generators. o Rail transportation terminal. • Non-exclusive easements for site access. o Non-exclusive use of a 2,100 gpm well supply source. o A 5,000 gpd trailer-mounted pilot plant. o Up to 20,000 sq. ft. of existing buildings. Existing infrastructure is in various states of repair as detailed in two site investigations 14 " 5 and would require some refurbishment and rework to be acceptable for integration, into a municipal drinking water facility. Portions of the site are likewise located within the flood plain 16 and constructed facilities would need to be built in accordance with any ensuing requirements. "Replacement Cost Approaisal Summary Report, prepared by Landmark Realty Analysts, Inc., October 3,2011. 15 Structural Evaluation, Intake & Outfall Pipelines, Intake Pump Station and Water Storage Reservoirs, The People's Moss Landing Water Desalination Project, Moss Landing Green Commercial Park, Modd Landing, CA, August 14, 2012. 16 Monterey County Planning & Building Inspection Department; Meeting September 30, 2004, Agenda Item 6. Page 3- 10 January 20 13 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 107, Packet Page 133 MONTEREY PENINSULA REGIONAL WATER ALITHORITY PROJECT FUNCTION The proposed PML treatment system would include inlet screens, booster pumps, single stage pressure filters, an ultrafiltration (UF) membrane treatment system, antiscalant dosing system, high pressure booster pumps with pressure exchange type ERDs, single pass RO system, post- treatment system, and product storage and distribution pump station. The RO system would operate at 40 percent recovery and limit operating flux to 8 gfd. The UF system would operate at a proposed flux of 35 gfd. The product water from the RO system would be post-treated with calcite and carbon dioxide for stabilization, along with addition of a corrosion inhibitor. For disinfection, the product would be dosed with sodium hypochlorite and stored in existing tankage on site. PML did not provide a detailed list of equipment or a site layout plan, stating that it was too early in the development of their project to have that information developed. It is therefore somewhat difficult to gauge the robustness of their approach. From the narrative description provided and listed membrane area assumptions, it is not clear that the major UF and RO train equipment contain redundant process units. From a process perspective, the proposed pretreatment system design may be acceptable. The largest unknown is the quality of water that will be extracted from the Moss Landing Harbor. There could be organics, metals and other contaminants entrained in the sediments overlaying the supply pumps that could complicate treatment. PML has proposed conducting a pilot study program prior to finalizing their process design, so this should help allay concerns. A previous pilot study conducted at MLPP found that direct UF pretreatment operated in concert with a coagulant was effective at pretreating a supply drawn from the Moss Landing Harbor, but that flux should be limited to 30 gfd 17 . A larger concern is with the RO system process design as a single pass system similar to the DWD approach. As stated in that discussion, we recommend including a partial second pass RO treatment system to produce a final product quality more in keeping with current supplies in the distribution system. 3.3.4 Residuals Handling Pretreatment residuals would come from the proposed filters and UF process units. A backwash recovery system is proposed, with decant sent to the outfall with the RO system brine stream. Neutralized UF and RO cleaning wastes would be treated similarly; or recovered for reuse within the MLCP. Brine would be discharged to the existing outfall. The outfall is currently not in use and there is evidence of disrepair in a video survey conducted sometime prior to 2008 18 . The video shows evidence of several areas of decoupling along the main outfall alignment. Also, according to the original plans, the outfall was installed below grade until the diffuser section 19 . However, portions of the main outfall appear to be currently uncovered; and one section shifted up—possibly as a consequence of the 1989 Loma Prieta earthquake. Many of the diffusers are clogged and covered with marine growth; and from the 17 Coastal Water Project Pilot Plant Report, May 2010, WWII 18 Outfall Video, Moss Landing Marine Lab, California State University. 19 Seawater Outfall for Kaiser Aluminum and Chemical Corporation, Moss Landing, California, by Kaiser Engineers, 1971. January 2013 Page 3-11 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 108, Packet Page 134 PROJECT FUNCTION MONTEREY PENINSULA REGIONAL WATER AUTHORITY terminus of the outfall it appears it may be largely filled with sand—up to half of the circumference. Consequently a fair amount of rehabilitative work would be required to place the outfall into service, and more detailed assessment—including an inspection of the interior of the outfall—is warranted. 3.3.5 Feed Water Characterization PAIL does not at this point have analytical data characterizing the proposed raw water supply. It will presumably be collected during their planned pilot test program. 3.3.6 Quality of Project Information The PAIL project is the least developed among the three as evidenced by the level of information provided. They were however very forthcoming in sharing all that was available, including original construction plans for the intake and outfall, video survey of the outfall, and other site specific reports. A listing of documents provided in addition to the response to the TAC is as follows: O Construction Plans: Seawater Outfall o Construction Plans: Relocation of Sea Water Intake O The People's Moss Landing Water Desal Project, Important New Updates, July 2012 O Response to SPI Questions, September 4, 2012 and September 27, 2012 O Environmental Issues and Constraints Report, SMB Environmental, September 2012 O Structural Evaluation, JAMSE Engineering Inc., August 2012. O Replacement Cost Appraisal Summary Report, Landmark Realty Analysts, Inc., October 2011. o Adopted Waste Discharge Requirements Order No. R3-2009-002, National Pollutant Discharge Elimination System (NPDES) Permit No. CA0007005 – Moss Landing Commercial Park and Moss Landing Cement Company, Moss Landing Cement Company Facility, Monterey County, March 2009. Overall, the lack of specificity as to the proposed plant facilities makes the technical and economic evaluation difficult and forces us to make additional assumptions on our own. 3.3.7 Omissions or Fatal Flaws We have not identified any fatal flows of a technical nature with the PML proposed system. The primary omission is the lack of defined lists of equipment in order to assist in validating cost estimates. Page 3- 12 January 20 13 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 109, Packet Page 135 MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECTED PERFORMANCE 4 PROJECTED PERFORMANCE This section discusses the following performance issues for each project: O Plant design capacity o Targeted product water quality • Disinfection strategy Plant design capacity refers to the proposed instantaneous flow achieved by a given plant design to achieve the annual produced water flow of 9,000 AFY or 5,500 AFY. The design capacity of a facility impacts both its construction and operating cost, and must take account of issues such as equipment redundancy, periodic maintenance, and overall online operating factor. The issue of product water quality is closely tied to the proposed demineralization system process design of each facility. As discussed previously, DWD and PML have proposed single pass RO systems; while Cal-Am has proposed a partial (40 percent) second pass system. The two approaches will produce different qualities of final product water from an overall salinity perspective, as well as levels of boron and chloride. In addition to salinity and individual constituent targets, the design must also achieve regulatory pathogen removal thresholds. The California Depaitinent of Public Health (CDPH) has primacy to regulate public water systems within the State. As such, they will review these proposed treatment approaches for compliance with the Surface Water Treatment Rule (SWTR) and the Long Term 2 Enhanced Surface Water Treatment Rule. It is anticipated the slant wells proposed for the Cal-Am project would be deemed groundwater under the influence of surface water and subject to the surface water regulations, as would the open intake sources for DWD and PML. Pathogen removal/inactivation requirements are quantified in increments of influent to effluent concentration, expressed in a log scale. For example 3-log removal is 99.9%. CDPH will establish the log removal requirements of a project based on information on the quality of the source water and other factors. The expected ranges of possible requirements for these projects are 3-5 for Giardia; 2-4 for cryptosporidium (crypto); 4-6 for virus. Some project proponents have indicated an expectation the requirements will fall at the low end of the ranges. Each treatment process is assigned a log removal credit for each pathogen. By summing the credits of all processes in the multi-barrier approach (filters, RO, disinfection, etc.) a total credit is achieved to meet or exceed the regulatory requirement. Under the disinfection strategy discussion we consider the removal credits likely achieved by the proposed projects. 4.1 CALIFORNIA AMERICAN WATER (CAL-AM) 4.1.1 Plant Design Capacity Defined demand requirements for the proposed supply to the Monterey Peninsula customers are 5,500 AFY and 9,000 AFY. Plant designs are rated in instantaneous production capacities for the purposes of sizing equipment (pumps, RO membrane trains, etc.) in units of mgd. 1.0 mgd is equivalent to annual production rate of 1,120 AFY. The required minimum plant capacity would therefore translate to 4.9 mgd or 8.0 mgd. This however is not necessarily what we would recommend as a conservative municipal plant design basis. Equipment breaks down, membranes January 20 13 Page 4- 1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 110, Packet Page 136 PROJECTED PERFORMANCE MONTEREY PENINSULA REGIONAL WATER ALITHORITY require cleaning, power outages occur. Without excess treatment capacity or high levels of component redundancy, annual deliveries could fall short. Cal-Am has proposed a design capacity basis of 5.4 mgd or 9.0 mgd. These capacities are fairly close to what you would get by assuming the treatment plant is on-line and producing water 90 percent of the time, which results in capacities of 5.45 mgd and 8.92 mgd. A 90 percent on-line factor is consistent in our experience of a well-designed and operated municipal RO plant that does not have redundant process units (e.g., RO trains). In Cal-Am's case, they are proposing redundant process units, so it's likely the facility will be capable of producing its nameplate capacity of 5.4 mgd or 9.0 mgd better than 90 percent of the time. An additional issue specific to Cal-Am however is the potential extraction and return of groundwater from the SVGB. Cal-Am estimates as much as 8 percent of the plant's annual production capacity may need to be returned to the basin—up to 780 AFY for the 9,000 AFY demand scenario20 . This has the effect of increasing the armual flow requirement to 5,960 AFY or 9,780 AFY; and corresponding minimum plant design capacity to 5.3 mgd or 8.7 mgd. Looked at another way, the plant would need to run at the proposed design capacity roughly 98 percent of the time to meet the higher delivery requirement. With the level or redundancy in Cal- Am's design we consider this achievable but not overly conservative. 4.1.2 Targeted Product Water Quality Though Cal-Am has produced a good degree of information to date with regard to their proposed project, the majority has been in service of supporting their CEQA and CPUC approval processes. They have specifically not developed a target product water quality specification, beyond stating the final product water will meet all State Maximum Contaminant Levels (IVICLs) and be non-corrosive. Rational for a partial second pass RO system includes concerns over levels of boron, chloride and sodium in the final product water as wel1 20 . Also in a presentation, Cal-Am projected treated water TDS from the plant of 380 mg/L and chloride level of 60 mg/L to blend with existing supplies with a TDS of 440 mg/L and chloride level of 90 mg/L 21 . From their proposed process design and post-treatment strategy we can however model projected product quality independently. In Table 4-1 we have summarized our projection of water quality produced from a partial two-pass RO process (40 percent blend of second pass product) stabilized with calcite, carbon dioxide and sodium hydroxide. RBF Memorandum, Monterey Peninsula Water Supply Project (MEPWSP) Project Description, April 20, 2012.. 21 Presentation — Monterey Peninsula Water Supply Project — Presentation to Monterey Co. Water Resources Agency, June 25, 2012. Page 42 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 111, Packet Page 137 MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECTED PERFORMANCE Table 4-1 - Summary of Projected Product Quality from Cal-Am Facility , - .. - :- .. s .:3, - - %, -,,,,,,, Total Dissolved Solids mg/L 380 Chloride mg/L 60 Boron mg/L 0.5 pH units > 8.0 Calcium mg/L as CaCO3 40 Alkalinity mg/L as CaCO3 40 4.13 Disinfection Strategy Cal-Am has stated their intent for their pathogen removal credits to comply with the Surface Water Treatment Rule (SWTR) and achieve 4 log removal of giardia and 6 log removal of virus. This would be accomplished through a multi-barrier treatment approach including their intake wells, pretreatment filters, RO process, chlorine disinfection, and (if required) UV disinfection. Our evaluation of the proposed Cal-Am process in terms of specific pathogen credits is presented in Table 4-2. The ability of Cal-Am's slant-wells to receive aquifer (bank) filtration credit is uncertain (dependent on design and local conditions) and the inclusion of UV disinfection is tentative, totals were calculated with and without those values. Table 4-2 - Summary of Projected Pathogen Credits for Cal-Am Project CDPH Requirement (Potential Range) 3-5 2-4 4-6 Aquifer Filtration 1 1 - Granular Media Filtration 2.5 2 2 RO 2 2 2 UV 2 2 Chlorination 0.5 TOTAL without Aquifer Filtration Credit & UV 5 4 6+ TOTAL without UV 6 ' 5 6+ TOTAL of All 6+ 6+ 6+ January 2013 Page 4-3 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 112, Packet Page 138 PROJECTED PERFORMANCE MONTEREY PENINSULA REGIONAL WATER AUTHORITY 4.2 DEEPWATER DESAL (DWD) 4.2.1 Plant Design Capacity The original DWD response to the TAC included proposed demand conditions of 25,000 AFY and 10,700 AFY, with plant capacities of 22.3 mgd and 9.1 mgd. In response to questions from SPI, DWD proposed to meet the 9,000 AFY condition with their original 9.1 mgd plant capacity, and the 5,500 AFY condition with a plant rated at 4.9 mgd. Using the same performance metrics discussed above for Cal-Am, the DWD facility would need to operate at an online factor of roughly 100 percent for the 5,500 AFY demand condition; and 88 percent for the 9,000 AFY scenario. It's unclear why DWD used varying assumptions for each condition, but could be a consequence of their larger, regional facility . approach and an assumption that the 5,500 AFY supply would be served as a portion of a larger capacity treatment plant. Like Cal-Am, DWD includes sufficient redundancy in their proposed treatment system equipment to justify a greater than 90 percent online factor. On an equivalent basis with Cal- Am, a 98 percent online factor would result in plant capacities of and 5.0 mgd and 8.2 mgd, respectively. 4.2.2 Targeted Product Water Quality In their response to questions from SPI, DWD provided their target product water quality which is reproduced in Table 4-3. In general, DWD proposes to provide a product supply that is compliant with all applicable drinking water regulations, is non-corrosive, and compatible with existing supplies in the Cal-Am distribution system. Table 4-3 - Summary of Projected Product Quality from DWD Facility ; ; I:110 76_ 1:; s .7:r; mg/L Total Dissolved Solids <500 Chloride rng/L 128 Boron mg/L <0.9 pH . • units 7.0 - 8.0 Calcium mg/L 20- 50 Alkalinity, as CaCO3 mg/L >55 Due to their proposed warming process, the product water will also likely have a temperature between 29 3/1 up to 26 °C (81 93 79 °F). This may be excessive depending on the temperature of existing supplies within the Cal-Am distribution system, temperature loss during transmission and their ability to blend and lower the delivered temperature to customers. Page 4-4 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 113, Packet Page 139 CDPH Requirement (Potential Range) Granular Media Filtration Chlorination Parameter MONTEREY PENINSULA REGIONAL WATER AUTHORITY PROJECTED PERFORMANCE 4.2.3 Disinfection Strategy DWD will achieve required disinfection and pathogen removal credits though media filtration, RO, and chlorine disinfection. We project the overall process to achieve overall requirements as summarized in Table 4-4. Table 4- 4 - Summary of Projec ted Pathogen Credits for DWD Projec t 4.3 PEOPLES MOSS LANDING (PML) 4.3.1 Plant Design Capacity The PML response to the TAC included proposed demand conditions of 5,500 AFY and 10,700 AFY, with plant capacities of 4.8 mgd and 9.4 mgd. In response to questions from SPI, PML proposed new capacity increments of 5,000 AFY and 10,000 AFY. Corresponding production capacities were not provided, though a narrative equipment list with design operating flux and membrane area and element assumptions were provided for each scenario. From this information, we calculated a plant design capacities of 4.5 mgd and 9.0 mgd—roughly equivalent to producing 5,000 AFY or 10,000 AFY if operated continuously (100 percent online factor). Actual target delivery scenarios for the peninsula are 5,500 AFY and 9,000 AFY. From the equipment information provided it does not appear that any excess membrane area is proposed that would indicate the presence of redundant equipment. With this approach, a lower assumption of achievable plant online factor would be recommended. However, we do not consider the approach good design practice and find it at odds with proposed systems from the other candidate proponents. We have therefore evaluated the PML system in our analysis of having redundant process units and therefore an equivalent system design capacity to DWD of either 5.0 mgd or 8.2 mgd. 4.3.2 Targeted Product Water Quality PML provided their target RO product water quality in a response to SPI, which is reproduced in Table 4-5Table 4-3. Included in the response was a statement that final product quality has not been established, but would meet all requirements stipulated in U.S. EPA drinking water standards. January 20 13 Page 4- 5 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 114, Packet Page 140 • PROJECTED PERFORMANCE MONTEREY PENINSULA REGIONAL WATER AUTHORITY Table 4- 5 - Summary of Projec ted Produc t Quality from PML Fac ilityl 11irti,=.) —= Total Dissolved Solids mg/L 225 Chloride mg/L 131. Boron mg/L 0 .6 pH units 6.6 Calc ium mg/L 1 Alkalinity, as CaCOs rng/L 1 Listed quality is projected permeate from the RO system, prior to final stabilization and pH adjustment. 4.3.3 Disinfection Strategy With their currently proposed pretreatment strategy, sufficient log removal credits for giardia, crypto and virus should be achievable. One unknown however is the level of organics that may be present in the harbor-extracted supply; and the potential to create disinfection byproducts. This issue should be explored in the planned pilot test program, which will also be used to finalize the proposed process design and disinfection strategy. Our evaluation results are presented in Table 4-6. Table 4- 6 - Summary of Projec ted Pathogen Credits for PIVIL Projec t ' T et:110 '.J(:= _ ....._ ._ CDPH Requirement (Potential Range) 3- 5 2- 4 4- 6 Granular Media Filtration 2.5 2 2 MF/UF 4 4 2 RO 2 2 2 Chlorination 0 .5 2+ TOTAL 6+ 6+ Page 4- 6 January 20 13 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 115, Packet Page 141 MONTEREY PENINSULA REGIONAL WATER AUTHORITY ECONOMICS 5 ECONOMICS In our original project scoping technical memorandum2 we recommended the following criteria to evaluate the candidate projects on an equivalent basis: o Uniformity in plant design capacity for the two non-regional approaches; equivalent capacity allocation for the proposed DWD regional project. O Equivalency in treatment to achieve: a common RO feed water quality following pretreatment; a common treated water quality goal; and pathogen removal credits required for the applicable supply source. O Uniformity in equipment redundancy. O Uniformity in unit cost criteria for common items. o Uniformity in cost factors applied to aggregated costs (e.g., contingencies; electrical and I&C costs; etc.). O Uniformity in unit costs for chemicals and other consumables for treatment evaluations. We accomplished implementing the above principles in large measure in our economic evaluation. We adjusted plant capacities for the evaluation on the basis described in Section 4, rating Cal-Am's proposed system at design capacities of 5.4 mgd and 9.0 mgd; and the DWD and PMEL systems at 5.0 ingd and 8.2 mgd. In terms of treatment process, we attempted to maintain the overall proposed process design of the proponents, but did evaluate all as including a partial (40 percent) capacity second pass RO system. We also assumed N+1 redundancy on all rotating equipment and major treatment process units (e.g., filters, RO membrane trains). We employed an equivalent basis in developing our capital equipment cost estimates, relying on targeted quotes for equipment and SPIs cost information from past, similar seawater RO projects. For indirect costs, we assumed fixed factors and applied them uniformly to each project. Each factor, expressed as a percentage, was applied to estimated plant construction cost, absent costs associated with off-site trenched pipelines. These factors included the following: I. Implementation Costs at 25 percent, to include items such as permitting, pre-construction design services, procurement development, and compliance activities. 2. Mobilization/Demobilization costs at 2 percent to account for supply and removal of contractor equipment to the facility during construction. 3. Electrical and I&C Systems cost at 18 percent, accounting primarily for post-service switchgear, motor control centers, drives, conduits, wire and SCADA systems. 4. Engineering and Startup cost at 15 percent, to include contractor engineering, overhead, profit and commissioning expenses. In addition, specific allowances were made to account for offsite right-of-way, easement and land acquisition costs, to cover items such as roadway repair, rehabilitation and replacement, separate from pipeline construction costs. These were applied at $80/LF for offsite trenched pipelines, in the absence of more specific proponent developed estimates. Similarly, additional January 20 13 Page 5- 1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 116, Packet Page 142 ECONOMICS MONTEREY PENINSULA REGIONAL WATER AUTHORITY project specific costs were applied as applicable for things like annual property lease and administrative payments and pilot testing. In addition to indirect costs, final contingency and mitigation allowances were applied. For contingency, we recommend a value of 30 percent at this stage of project development. While some proponent projects have more project definition than others at this stage, we find significant risk elements for each that warrant this level of conservatism. For mitigation, we've applied a 1 percent allowance to the overall project cost. As no project has advanced to the stage where a mitigation plan is in place, we consider it prudent to consider a pro-forma allowance at this time. Capital facilities costs have been aggregated into the following seven categories for presentation: 1. Intake/Outfall Facilities—includes costs associated with intake wells and pump stations along with corresponding facilities associated with brine disposal. 2. Pretreatment and Residuals Handling — includes facilities for the pretreatment of seawater ahead of the RO system, including filters, chemical feed systems, storage tanks and related facilities associated with the treatment and disposal of any residuals. 3. Desalination System — covers the RO membrane trains, high pressure feed pumps, energy recovery devices, and membrane cleaning system. 4. Post-Treatment — includes product stabilization systems and disinfection processes. 5. Distribution Facilities — includes treated water storage and pumping systems. 6. Site Structures — includes buildings, roads, landscaping, site fencing and other structures. 7. Offsite Trenched Pipelines — Includes all supply, product and brine disposal pipelines. Product pipelines were estimated to a common terminus in Seaside at the existing Cal- Am meter location. For annual operating costs and other expenses we implemented a similar approach. Chemical unit prices were standardized across our estimates as listed in Table 5-1. Table 5-1 - Summary of Chemical Unit Prices Sodium Bisulfite $0.45/1b Sodium Hypochlorite $1.12/1b Sodium Hydroxide $0.20/1b Lime (Calcite) $0.17/113 Carbon Dioxide $0.22/1b Scale Inhibitor (antiscalant) $1.63/1b Sulfuric Acid $0.15/1b Ferric Chloride $0.40/1b Page 5-2 January 2013 irRib) MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 117, Packet Page 143 MONTEREY PENINSULA REGIONAL WATER AUTHORITY ECONOMICS The rates were primarily based on Cal-Am' s response to SPI' s questions, though we did use the DWD unit prices for sodium bisulfite. Cal-Am's listed price for sodium bisulfite ($2.70/1b) seemed high and was significantly above other pricing on this chemical that we have seen. In terms of chemical application rates/dosages, we primarily maintained the rates proposed by the individual proponents, unless we found a process-specific reason to adjust them. _ Similar to the capital cost estimates, annual operating and maintenance (O&M) costs were aggregated for presentation into four main categories—Energy, Chemicals, Expendables, and Other. Each facility was assumed to operate full time (365 days per year). Energy costs were developed by estimating loads and efficiencies of motorized equipment items and assigning an electrical unit cost. Cal-Am provided variable summer and winter electrical rates from PG&E at an average annual cost of $0.131/kW-hr. The other two projects in the Moss Landing area proposed rates of $0.08/kW-hr. We were not able to disprove any of the listed rate assumptions and therefore left them as stated by the individual proponents for the purposes of our evaluation. The expendables category includes replaceable media for filters (including MI/UF) and RO process membranes. Equivalent unit costs were used for MF/UF process membranes ($1,000 per module), cartridge filter elements ($16 per 40-in cartridge), and RO membrane elements ($500 per element). Both MF/UF and RO process membranes were assumed to have a 5-year life. The Other category lists separately operations and maintenance labor and equipment replacement costs. Cal-Am provided the most detailed estimate of operation and maintenance labor requirements and costs, which were therefore applied equally across the three projects. It is reasonable to assume at this point that any of the candidate facilities would be operated by a contract operations group with a similar pricing structure. For an equipment replacement allowance, we instituted a common factor of 1.5 percent of the complete system cost (including offsite trenched pipelines but prior to application of indirect costs, contingencies, and mitigation allowances) as an annual expense. The results of our evaluation are presented in Table 5-2 on the following page. The table summarizes our assessment of the relative cost of each project on the common evaluation criteria described above. Based on the information used in its preparation and our overall scope of evaluation, we would consider it a Class 5 estimate as defined by the Association for Advancement of Cost Engineering (AACE), having an accuracy range of -30 to +50 percent. The AACE defines the use of Class 5 estimates as focused on conceptual screening of alternatives. In the context of this project, we consider the costs useful for a comparison of the various proponent projects among themselves, as the costs were developed on an equivalent basis. The overall level of project development and the scope of our evaluation do not warrant the costs to be used on a stand-alone basis as a reliable indication of future construction and operating costs. CS- A1) January 20 13 Page 5- 3 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 118, Packet Page 144 ECONOMICS MONTEREY PENINSULA REGIONAL WATER AUTHORITY Table 5-2 - Summary of Evaluated Capital and Operating Cost Estimates _ - . . Oast Element - . . - Projec t Proponent .Cal- Am DWD PML .- `. 5:5 - kAFY • .9 kAFY~ ." '..5.5 kAFY . - CAPITAL COSTS (In Millions 2012 Dollars) Intake/Out- fall Facilities $23.0 $17.7 $-0- $-0- $-0- $-0- Pretreatment & Residuals Handling $10.6 $7.94 $11.2 $7.94 $20.2 $13.6 Desalination System $22.4 $15.0 $19.4 $13.2 $19.9 $14.0 Post-Treatment $1.48 $0.88 $1.48 $0.88 $1.66 $1.07 Distribution Facilities $6.14 $5.08 $3.35 $3.26 $0.35 $0.26 Site Structures $11.5 $10.8 $3.65 $2.52 $10.0 $7.00 Offsite Trenched Pipelines $24.9 $24.9 $23.0 $22.7 $25.1 $25.1 Indirect Costsl $57.5 $50.3 $52.9 $42.7 $67.9 $62.3 Contingency Allowance (30%) $47.2 $39.8 $34.5 $28.0 $43.6 $37.0 Mitigation Allowance (1%) $1.60 $1.30 $1.20 $0.90 $1.50 $1.20 TOTAL $206 $174 $151 $122 $190 $161 ANNUAL O&M COSTS (in Millions 2012 Dollars) Energy $5.38 $3.26 $3.44 $2.10 $3.98 $2.43 Chemicals $0.32 $0.19 $0.81 $0.49 $0.93 $0.57 Expendables $0.69 $0.45 $0.78 $0.52 $1.09 $0.65 Other Proponent Expenses $1.59 $1.45 - O&M Labor $2.69 $2.36 $2.69 $2.36 $2.69 $2.36 Equipment Replacement 2 $1.50 $1.23 $0.93 $0.76 $1.16 $0.92 TOTAL $10.6 $7.49 $10.2 $7.68 $9.85 $6.93 ANNUAL COST OF WATER (in Millions 2012 Dollars) Capital Recovery3 $19.1 $16.2 $8.73 $7.06 $11.0 $9.37 Total Annual Cost $29.7 $23.7 $18.9 $14.7 $20.9 $16.3 Production Cost of Water (S./M) 4 RANGE (VAF) $3,300 52, 310 - $4, 950 $4,310 0 30 17- $6, 465 $2,100 $1, 470 - $3550 $2,670 $1870 - $4, 0 0 5 $2,320 51, 65 - 53, 480 $2,965 $2, 0 75 - $4, 450 lIncludes implementation costs at 25%; ROW easement] and costs, mobilization/demobilization at 2%; electrical and l&C systems at 18%; engineering and startup at 15%; and addlional project proponent prescribed costs. All percentages applied to plant facilities costs. 2 Calculated as 1.5%of plant facilities costs. 3 Capital recovery factor for DWD and PML based on an interest rate of 4.0%and term of 30 years; based on an interest rate of 8.49%and 30 years for Cal-Am; see additional discussion in Section 5. 4 0verall accuracy of costs is estimated at AACE Class 5 with an accuracy of -30%to +50%; range values indicate potential spread. Page 5-4 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 119, Packet Page 145 MONTEREY PENINSULA REGIONAL WATER AUTHORITY ECONOMICS A Capital Recovery Factor (CRF) is used to convert a single up-front capital cost into an annual amount to be recovered, as if the money was repaid as a loan, based on an interest rate and time period. As listed in Note 3 on Table 5-2, a CRF was used for the DWD and PML projects at an interest rate of 4.0 percent. This rate approximates the cost of tax-exempt borrowing for publicly financed projects which would likely be applicable to DWD and P,ML. In this case, the CRF equals 0.05783 Cal-Am may not have access to public financing and could have a pre-tax weighted cost of capital based on 5.0 percent market-rate debt (their authorized debt return is 6.63%) and 9.99% percent equity return, grossed up for income and ad valorem taxes. This would result in higher annual costs for Cal-Am than shown. However, there are additional differences in how public versus private capital investments are amortized, the impacts of which are not analyzed in this report. The Monterey Peninsula Water Management District has computed that for Cal-Am, a CRF representing the average annual capital recovery over a 30-year period equals 0.92933 which would result as if the interest rate was 8.49%. This CRF is computed as follows: {[(Pre-Tax Equity Return: 9.99% x 53% x 1.69 gross-up) +(Pre-Tax Debt Return: 5% x 47% x 1.69)-(Interest Paid Tax Off-Set: 5% x 40.25% effective tax rate divided by .99736 collectibles rate)] +(Ad Valorem Taxes: 1.05%)]1/2 + (3.33% annual depreciation) = 0.092933 proxy CRF. Specific additional considerations related to the costs for each project are provided below. 5.1 CALIFORNIA AMERICAN WATER (CAL- AM) A summary of our estimate of capital system costs to that provided by Cal-Am is provided in Table 5- 3. For the most part, the two estimates align fairly closely. A discussion of individual elements is presented below. We found general agreement with Cal-Am's proposed costs for components of their proposed intake and outfall systems. The slant well installation cost is in line with estimates we've seen elsewhere; and the corresponding pipeline estimates are very detailed for this level of project development. For the pretreatment and residuals handling systems, we found generally close agreement—but did independently adjust costs for the pressure media filters based on an equipment quotation we received. We also provided relatively minor adjustments to their allowances for interconnecting piping, cartridge filters and chemical addition systems. For the desalting system equipment, we priced components of the energy recovery system (isobaric pressure exchangers and booster pumps) based on specific quotes from the manufacturer; and priced the RO trains according to our own cost models similar to the other projects to provide a consistent basis. We also developed our own estimates for the post-treatment system equipment. For indirect costs, we did not find anything particularly objectionable; but did price factor-based costs on the common percentage basis we established. Their cost for land and right-of-way easements was found to be very detailed and comprehensive. January 2013 Page 5-5 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 120, Packet Page 146 ECONOMICS MONTEREY PENINSULA REGIONAL WATER AUTHORITY Table 5-3 - Summary of Cal-Am Capital Cost Evaluation , ..., ^•- •- ''''' '7_ Cost Element , ' -' • , r 13A, , Vg [email protected] rikg111:Pf. ® , r4c=' ,1 -- s - :,--P. :Pip,v/ $17.7 - • ' ' ' ' ' ' 9 kA Intake/Outfall Facilities $23.0 $17.7 $23.0 Pretreatment & Residuals Handling $9.71 $8.52 $10.6 $7.94 Desalination System $27.9 $19.2 $22.4 $15.0 Post-Treatment $1.25 $1.09 $1.48 $0.88 Distribution Facilities $6.14 $5.08 $6.14 $5.08 Site Structures $11.5 $10.8 $11.5 $10.8 Offsite Trenched Pipelines $24.9 $24.9 $24.9 $24.9 System Subtotal $104 $87.3 • $100 $82.3 Plant Facilities (PF) Subtotal 2 $79.5 $62.4 $75.1 $57.4 Indirect Costs3 Implementation Costs (25% of PF) ROW, Easement and Land Costs Mobilization/Demobilization (2% of PF) Electrical, l&C Systems (18% of PF) Engineering/Startup (15% of PF) Additional Proponent Prescribed Costs $26.4 $6.20 $1.44 $15.4 $10.8 -0- $26.4 $5.20 $1.21 $12.9 $9.03 -0- $25.0 $6.20 $1.50 $13.5 $11.3 -0- $25.0 $5.20 $1.15 $10.3 $8.62 -0- Subtotal', $164 $142 $158 $133 Contingency Allowance (30%) 3 $41.2 ' $35.5 $47.2 $39.8 Mitigation Allowance (1%) 3 $1.60 $1.40 $1.60 $1.30 TOTAL $207 $179 $206 $174 All costs are presented in millions of 2012 dollars. 2 Plant facilities costs include the System Subtotal, less off site trenched pipelines. 3 Listed percent-cost factors apply only to the SPI developed cost estimates. Indirect costs, contingency, and mitigation allowances shown under the Cal-Am estimates were provided by them and are presented accordingly without adjustment. 4 The listed subtotal includes both the sum of Indirect Costs and the System Subtotal. Overall, the relatively high cost of the Cal-Am system is most directly tied to the cost of their proposed intake system; while DWD and PWM have proposed relatively low cost alternatives. Our corresponding operating cost estimates are provided in Table 5-4. Page 5- 6 January 20 13 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 121, Packet Page 147 MONTEREY PENINSULA REGIONAL WATER AUTHORITY ECONOMICS Table 5-4 - Summary of Cal-Am O&M Cost Evaluation Ylik.1 Energy $6.11 $3.73 $5.38 $3.26 Chemicals $0.63 $0.39 $0.32 $0.19 Expendables $0.72 $0.49 $0.69 $0.45 Other Operations & Maintenance Labor $2.69 $2.36 $2.69 $2.36 Equipment Replacement (1.5% of PF) $1.61 $1.25 $1.50 $1.23 TOTAL $11.8 $8.22 $10.6 $7.49 1 All c osts are presented in millions 0 120 12 dollars. In our estimate we adjusted some assumed operating efficiencies of centrifugal pumps and motors from 80 percent to 75 percent; increasing costs somewhat. However, we decreased the projected average operating pressure of the first pass RO membrane feed pumps and energy recovery booster pumps based on projected operating conditions and water temperature. This had the effect of lowering our overall energy estimate from that provided by Cal-Am. Our chemical cost estimate is likewise lower, owing primarily to our lower unit cost factor for sodium bisulfite. Overall, Cal-Am's projected O&M cost is among the highest of the estimates for the three proponent projects-a consequence of their higher energy cost directly tied to their more than 60 percent higher electrical rate. At an equivalent industrial rate of $0.08/1cW hr, annual energy cost in our estimates would drop to $3.28 million/$2.00 million under each capacity alternative. Cal-Am has recently indicated the potential of receiving power at an annual rate of $0.087/kW- hr. This alternative cost scenario is coupled with a second cost-sensitivity analysis performed on slant well replacement frequency in Table 5-5. In examining the impacts of potential slant well replacement, the alternative looks at replacing the wells up to three times over the 30-year evaluation term. CSP° January 2013 Page 5-7 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 122, Packet Page 148 ECONOMICS MONTEREY PENINSULA REGIONAL WATER AUTHORITY Table 5-5 - Summary of Cal-Am Cost Sensitivity Evaluations E 1:f- , c -, "; .; - CI; jf *.111; 1 (1"; - )1 Ltic 6"- . _ i'- ', 4!_ ].. --' :., :s :7' 7± 1- 111.- ; ; f}r` - 7-63! ,T=fi ,,,cf, 1 , Energy $5.38 $3.26 $5.38 $3.26 $3.68 $2.24 Chemic als $0 .32 $0 .19 $0 .32 $0 .19 $0 .32 $0 .19 Expendables $0 .69 $0 .45 $0 .69 $0 .45 $0 .69 $0 .45 Other 0 & M Labor Equipment Replac ement $2.69 $1.50 $2.36 $1.23 $2.69 $5.70 $2.36 $4.24 $2.69 $1.50 $2.36 $1.23 TOTAL $10.6 $7A9 $14.8 $10.5 $8.88 $6.47 Capital Rec oyery4 $19.1 $16.2 $19.1 $16.2 $19.1 $16.2 Total Annual Cost $29.7 $23.7 $33.9 $26.7 $28.0 $22.7 Production Cost of Water (S/A9 $3,300 $4,310 $3,765 4,855 $3,110 $4,120 1 All c osts are presented in millions of 20 12 dollars. 2 Slant well replac ement estimated at three times during 30 - year term with c osts added to normal equipment replac ement estimates. 3 Energy c osts c omputed based on an annual average rate of $0 .0 871kW- hr. 4 Annual c apital rec overy extrac ted from Table 5- 2. The analysis of slant well replacement is considered to be at the outside boundary of what could be expected to occur. Our general feeling is the slant wells could well last the duration of evaluation term and potentially beyond. However, even with the accelerated replacement considered, total cost of water produced would only increase around 15 percent. The lower power rate is considered more likely and would result in an estimated 6 percent reduction in overall cost. 5.2 DEEPWATER DESAL (DWD) We have summarized our estimated capital cost of the DWD treatment facility in relation to costs prepared by DWD in Table 5-6. Page 5- 8 January 20 13 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 123, Packet Page 149 MONTEREY PENINSULA REGIONAL WATER AUTHORITY ECONOMICS Table 5-6 - Summary of DWD Capital Cost Evaluation firi,J1Wfoigiiir ,,.., 1 p- ; -,,, ; $-0- ilvii) _* . Evaluatecli -,..,,........ - .. t- ,1± ,, -'w 17'r ...- •., - , 1.L._ . , c - - . Intake/Outfall Facilities $-0- $-0- $-0- Pretreatment & Residuals Handling $16.7 $11,6 $11.2 $7.94 Desalination System $17.2 $11.5 $19.4 $13.2 Post-Treatment $2.41 $1.57 $1.48 $0.88 Distribution Facilities $4.96 $3.32 $3.35 $3.26 Site Structures $4.02 I $2.56 $3.65 $2.52 Offsite Trenched Pipelines $30.9 $30.6 $23.0 $22.7 System (5) Subtotal $76.2 $61.2 $62.1 $50.5 Plant Facilities (PF) Subtotal 2 $45.3 $30.6 $39.1 $27.8 Indirect Costs3 Implementation Costs (25% of S) $12.8 $10.1 $15.5 $15.5 ROW, Easement and Land Costs -0- -0- $5.20 $5.20 Mobilization/Demobilization (2% of PF) $0.74 $0.45 $0.78 $0.56 Electrical, l&C Systems (18% of PF) $5.90 $3.61 $7.04 $5.01 Engineering/Startup (15% of PF) $8.85 $5.41 $5.87 $4.18 Additional Proponent Prescribed Costs $18.5 $12.2 $18.5 $12.2 Subtotal4 $123 $93.0 $115 $93.2 Contingency Allowance (30%)3 $8.85 $5,41 $34.5 $28.0 Mitigation Allowance (1%) 3 -0- -0- $1.20 $0.90 TOTAL $132 $98.4 $151 $122 1 All costs are presented in millions of 2012 dollars. 2 Plant facilities costs include the System Subtotal, less off site trenched pipelines. 3 Listed percent-cost factors apply only to the SP! developed cost estimates. Indirect costs, contingency, and mitigation allowances shown under the DWD estimates were provided by them and are presented accordingly without adjustment. 4 The listed subtotal includes both the sum of Indirect Costs and the System Subtotal. The increased cost of our estimate is largely due to the addition of a 40 percent capacity second will likely be difficult and may have a higher cost, but we lack information to at this stage of assessment to provide a more detailed analysis. DWD also appeared to use higher unit cost and installation factors than we employed; but then a comparatively low contingency allowance of 12 percent. January 2013 Page 5-9 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 124, Packet Page 150 ECONOMICS MONTEREY PENINSULA REGIONAL WATER AUTHORITY It is also worth considering that the proposed DWD facility is a regional project with a build out capacity of 25,000 AFY. Intake and brine disposal pipelines are sized for the ultimate plant capacity; and the totals listed in the DWD and SPI estimates for these items as well as site facilities represent a flow based proration. DWD also prorated equipment costs for the 5,500 AFY plant alternative off their costs developed for the 9,000 AFY plant (9.1 mgd capacity); while we developed separate equipment and facilities estimate for the 5.0 mgd and 8.2 mgd plant sizes. Lastly, the DWD cost for the intake system is limited to the pipeline from MLPP intake pump station to the Capun-o Ranch treatment facilities site. Specifically omitted are the new 48-in deep water intake pipeline, modifications to the MLPP intake pump station, and the proprietary warming system equipment. According to DWD, the costs for these facilities will be borne by a separate entity/project and provided to DWD for use as part of the regional desalination facility, subject to an annual lease (accounted for in the O&M cost estimate). This accounting is largely the reason for the low capital cost associated with the DWD in relation to the Cal-Am and PML projects. It does however result in a higher O&M cost, summarized in Table 5-7. Table 5-7 - Summary of DWD O&M Cost Evaluation , .- iL i 1 ....., ,. L c j . - . J''? 1 - '1v( - ! l'f 1 - \ ( i " - s s , , el, Energy $2.22 $1.34 $3.44 $2.10 Chemicals $0.47 $0.28 $0.81 $0.49 Expendables $1.31 $0.89 $0.78 $0.52 Other Other Proponent Expenses $1.59 $1.45 $1.59 $1.45 Operations & Maintenance Labor $2.36 $1.43 $2.69 $2.36 Equipment Replacement (1.5% of PF) $0.93 $0.64 $0.93 $0.76 TOTAL $9.34 $6.31 $10 .2 $7.68 I All costs are presented in millions of 2012 dollars. Overall we project a higher energy cost estimate for the DWD project based on an assumed energy rate of $0.08/kW-hr throughout; where DWD appears to have used a $0.04/kW-hr rate for some of their on-site facilities. The projected cost of chemicals is higher in our estimate as well, as DWD omitted accounting for the cost of post-treatment chemicals in their estimate (calcite, carbon dioxide and sodium hydroxide). Our cost of expendables however is reduced, based largely on what appears to be a lower unit cost factor with the RO process membranes, even including the additional membranes associated with the second pass RO system. Included in the category of "Other Proponent Expenses" for DWD are the annual lease costs associated with their plant site and intake facilities as well as annual profit. This category of expense has the effect of raising their overall annual costs to be roughly equivalent to Cal-Am, even though their costs for energy, chemicals and expendables are lower. DWD subsequently provided documentation of their likely cost of electricity. Power would need to be sold through Salinas and then wheeled back to DWD. The proposed cost would be Page 5-10 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 125, Packet Page 151 MONTEREY PENINSULA REGIONAL WATER AUTHORITY ECONOMICS between $0.04 and $0.06 per kW-hr. The impact of these potential rates on their project costs is summarized in Table 5-8. Table 5-8 - Summary of DWD Cost Sensitivity Evaluations 1:,.15 - 5.Agarfl:a 'el iig ,' :' 1 1• ' `=-' :,' iN,;.6L2' '7) i ',4;1,;? LIN 41 , ‘, ' 1 '.- - ' 3- s ' i v, :l r •= :), 4:41_ 7'; e --- r :•. lq, 1.0 .!" ' ,E) ., I P, ' / Tf;-) : - i'n Energy $3.44 $2.10 $2.58 $1.58 $1.72 $1.0 5 Chemic als $0 .81 $0 49 $0 .81 $0 .49 $0 .81 $0 .49 Expendables $0 .78 $0 .52 $0 .78 $0 .52 $0 .78 $0 .52 Other Proponent Expenses 0 & M Labor Equipment Replac ement $1.59 $2.69 $0 .93 $1.45 $2.36 $0 .76 $1.59 $2.69 $0 .93 $1.45 $2.36 $0 .76 $1.59 $2.69 $0 .93 $1.45 $2.36 $0 .76 TOTAL $10.2 $7.68 $9.38 $7.16 $8.52 $6.63 Capital Rec overys $8.73 $7.0 6 $8.73 $7.0 6 $8.73 $7.0 6 Total Annual Cost $18.9 $14.7 $18.1 $14.2 $17.3 $13.7 Production Cost of Water (S/A9 $2,100 $2,670 $2,010 $2,585 $1,915 $2,490 1 All c osts are presented in millions of 20 12 dollars. 2 Slant well replac ement estimated at three times during 30 - year term with c osts added to normal equipment replac ement estimates. 3 Annual c apital rec overy extrac ted from Table 5- 2. As shown a reduction in power rate could reduce costs by up to 9 percent. January 20 13 Page 5- 11 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 126, Packet Page 152 ECONOMICS MONTEREY PENINSULA REGIONAL WATER AUTHORITY 5.3 PEOPLES MOSS LANDING (PM L) The results of our capital cost evaluation of the PML project are presented in Table 5-9. Table 5-9 - Summary of PML Capital Cost Evaluation J -7.:6-ii[iiiii=:DY , ,- • .,, , 14 \, Ej [; P: ' [fj- p .S- , '- :, - .:T.:•,1 -777,',' Intake/Outfall Fac ilities $- 0 - $- 0 - $- 0 - $- 0 - Pretreatment & Residuals Handling 2 See Note 2 See Note 2 $20 .2 $13.6 Desalination System 2 $56.0 $28.0 $19.9 $14.0 Post- Treatment2 See Note 2 See Note 2 $1.66 $1.0 7 Distribution Fac ilities $- 0 - $- 0 - $0 .35 $0 .26 Site Struc tures $10 .0 $7.0 0 $10 .0 $7.0 0 Offsite Trenc hed Pipelines $25.0 $25.0 $25.1 $25.1 System Subtotal $91.0 $60 .0 $77.2 $61.0 Plant Fac ilities (PF) Subtotal 3 $66.0 $35.0 $52.1 $35.9 Indirec t Costs4 $42.0 $21.0 Implementation Costs (25% of PF) See Note 4 See Note 4 $19.3 $19.3 ROW, Easement and Land Costs $30 .2 $30 .2 Mobilization/Demobilization (2% of PF) $1.0 4 $0 .72 Elec tric al, l&C Systems (18% of PF) $9.38 $6.47 Engineering/Startup (15% of PF) $7.82 $5.39 Additional Proponent Presc ribed Costs $0 .20 $0 .20 Subtotal 5 $133 $81.0 $145 $123 Contingenc y Allowanc e (30 %) 4 See Note 4 See Note 4 $43.6 $37.0 Mitigation Allowanc e (1%) 4 - 0 - - 0 - $1.50 $1.20 TOTAL $133 $81.0 $190 $161 1 All costs are presented in millions of 2012 dollars. 2 PML supplied costs for PretreatmentlResiduals Handling, Desalination System, and Post-Treatment were provided as a single lump sum and are presented here accordingly. 3 Plant facilities costs include the System Subtotal, less off site trenched pipelines. 4 Listed percent-cost factors apply only to the SPI developed cost estimates. Indirect costs, contingency, and mitigation allowances shown under the PML estimates were provided by them and are presented accordingly without adjustment. 5 The listed subtotal includes both the sum of Indirect Costs and the System Subtotal. PML presented their costs for the main treatment facilities as a lump sum number, making comparison of individual equipment estimates impossible. That said, the respective totals closely match. The disparity between the estimates at the 9,000AFY alternative is likely due to the difference in system capacity assumed-9.4 mgd for PML 8.2 mgd in our estimate. Page 5- 12 January 20 13 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 127, Packet Page 153 MONTEREY PENINSULA REGIONAL WATER AUTHORITY ECONOMICS PML provided an allowance of $3.0 million for repair and upgrade to their existing intake pump station and outfall pipeline. We have no basis at this stage to recommend a higher estimate, but do note that a comprehensive evaluation of the current state of the outfall pipeline and attendant repair requirements is not available at this time. It may be that when such evaluations are conducted, the price could increase. PML also provided single lump sum costs for indirect expenses, including project contingency allowances. We find these allowances insufficient for a project at this stage of development with significant undefined issues. MEL still intends to validate their treatment approach through a planned pilot testing program, making reliance on estimates prepared on the current process design questionable. We also point out that the indirect and contingency allowances applied are uniform across our evaluation for the three projects. PML does have a high cost associated with ROW, land and easement allowances. This is a combination of the prescribed $25 million cost of the MLCP 25-acre site and related facilities, along with a roughly $5 million dollar allowance for ROW and easements associated with the product water pipeline. Overall the PIVEL facility capital costs fall in the middle of the three proponent projects; and notably higher than the DWD estimate which shares comparatively low intake and outfall system costs in comparison to Cal-Am. The primary reason for this is their expanded pretreatment system, including both media filtration and MF/UF treatment to treat the supply extracted from the Moss Landing harbor. The results of the O&M cost evaluation are presented in Table 5-10. Table 5- 10 — Summary of PIVIL O&M Cost Evaluation Other Operations & Maintenanc e Labor $0 .94 $0 .94 $2.69 $2.36 Equipment Replac ement (1.5% of PF) $1.33 $0 .81 $1.16 $0 .92 TOTAL $8.84 $5.03 $9.85 $6.93 1 All costs presented in millions 01 2012 dollars Overall our estimates closely match those provided by PML; with any differences attributed primarily to the differences in the 9,000 AFY plant design capacity assumption discussed above along with the addition of a second pass RO system to their process. The projected operating costs of the PML system are the lowest of the three proponents. The fact that they have additional process equipment is reflected in their higher energy, chemical, and expendable category expenses in relation to DWD. Those categories are higher than the comparable Cal-Am costs as well, with the exception of energy. Though PML's projected energy use is higher; their lower cost of electricity results in a lower annual cost. January 20 13 Page 5- 13 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 128, Packet Page 154 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 129, Packet Page 155 MONTEREY PENINSULA REGIONAL WATER AUTHORITY IMPLEMENTATION CONSIDERATIONS 6 IMPLEMENTATION CONSIDERATIONS Each of the projects has been evaluated in terms of the major issues it faces for environmental compliance and permitting, and the consequences for the development schedule. The evaluation was performed at a very high level and based upon conceptual rules of thumb. In order to screen the issues of significance, the prior Coastal Water Project E11R 22 was reviewed and largely relied upon to assess facts and mitigation strategies for environmental compliance. That document was presumed to have identified the relevant permits for prior project approaches. Based upon our judgment, the major differences between the three proposed projects and the alternatives described in the Coastal Water Project DR were assessed to determine the additional major permits that would need to be obtained and the new environmental assessments that would be necessary. Each of the project sponsors provided estimates of the schedule for implementation including the estimated timing for environmental compliance and major permits. The conceptual schedule and schedule risk identified by the Consultants were reviewed with the project sponsors for comment in an effort to present consensus on the project schedule and risks. Although the prior E1R identified more than 25 discretionary approvals which must be obtained for the project alternatives, this review focused on a simplified list of discretionary approvals based upon our judgment that these approvals would most likely dictate the critical path for project development. O Approvals related to intake of seawater O Approvals related to project discharge • Jurisdictional permitting for water of the U.S. • Coastal Development Permitting Moreover, a highly simplified list of tasks for environmental compliance was created around these discretionary approvals. Those tasks in order: 1. A project description must be completed. 2. An Environmental Assessment must be made. 3. An DRIEIS must be completed (CEQA/NEPA compliance). 4. Commercial Agreements must be negotiated/ Cal-Am must obtain a Certificate of Public Convenience and Necessity (CPCN), after certification of the E1R. 5. Jurisdictional Permits must be obtained for facilities impacting Waters of the U.S. 6. NPDES Permits must be amended/obtained. 7. Coastal Development Permits must be obtained. 22 California American Water Company, Coastal Water Project, Final Environmental Impact Report, October 30, 2009 January 2013 Page 6-1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 130, Packet Page 156 IMPLEMENTATION CONSIDERATIONS MONTEREY PENINSULA REGIONAL WATER AUTHORITY The prior E1R found that two methods of intake of seawater would not cause a significant impact on the marine environment: 1. The use of a subsurface intake was presumed to cause no adverse impact to the marine • environment. 2. The use of discharge from the MLPP would not cause an increased use of water from the marine environment, and thus would not cause an impact as long as the power plant continued to use once-through cooling. The Prior EER similarly found that there was no significant impact to the marine environment under two proposed methods of brine discharge: 1. The blending of waste products (primarily waste brine) with the MITP discharge would sufficiently dilute the discharge to avoid significant impacts. 2. The use of the MRWPCA ocean outfall would cause sufficient mixing of the waste brine and other products to avoid significant impacts. With regard to financing risk as it applies to proceeding with at-risk design development activities, we have not reviewed the extent to which the project sponsors have investors that are willing to shoulder financial risks associated with development of the proposed desalination projects. For any project to be successful there must be financial backing sufficient to pay development expenses prior to the issuance of major permits and the execution of definitive commercial agreements for project implementation. We have developed project implementation schedules for the project based upon an assumption that investors' assessment of contingent risks would not delay logical development activities that affect the critical path for project implementation. For example, it has been assumed that all of the projects could proceed with preliminary design and definition of engineering parameters through activities such as pilot testing prior to the issuance of major permits, even though there is substantial financial risk to these endeavors. Thus the schedules could be overly optimistic when considering these financial risks. We have noted in the generic schedules herein that in addition to project review under CEQA and NEPA, there are a number of discretionary approvals whose issuance may address issues beyond those normally required for certification of these environmental documents. The State of California created an Ocean Desalination Handbook which included policy guidance from the California Coastal Commission and other State agencies to provide some guidance on the criteria that would be used in discretionary review of projects. Similarly NOAA has issued policy guidance regarding the process for obtaining discretionary approvals within the Marine Sanctuary. Notably: o The Coastal Commission will consider how effectively the project will "protect and enhance the marine environment" o There is a strong preference among State and Federal agencies for sub-surface intake compared to open-water intake. Open water intakes must be demonstrably preferable. o Review of environmental effects of the projects should include consideration of projects contemplated in the future and by others to ensure adequate evaluation of the Page 6-2 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 131, Packet Page 157 MONTEREY PENINSULA REGIONAL WATER AUTHORITY IMPLEMENTATION CONSIDERATIONS potential cumulative impacts of projects. Mitigation/enhancement strategies should be coordinated and piecemeal approvals avoided. O There is a preference for public ownership of ocean desalination projects compared to private ownership. It is highly speculative and beyond the scope of this report to fully analyze how each of the projects may manage gaining discretionary approvals. We offer some observations: O A comparison must be made between the logical means of taking water from the marine environment to ensure that the selected method is preferred. It is to the schedule advantage of any project that all projects be fully evaluated. O Comparison/evaluation of environmental impacts to the marine environment and the mitigation strategies should include consideration of future projects and cumulative impacts. O Public stewardship and oversight should be detailed prior to review by the Coastal Commission. 6.1 CALIFORNIA Aryl ERICAN WATER (CAL-AM) The implementation path for the Cal-Am proposal is very well defined. Moreover, the CPUC is aggressively pushing forward implementation of the project. The CPUC has published a schedule for completion of the EIR and CPCN for the project. Cal-Am has provided an estimated schedule for implementation of the project following the CPCN. The Notice of Preparation (NOP) issued by the CPUC indicates that a Subsequent EIR is being prepared. Following Scoping Hearings on October 25 and 26, a "Scoping Report" will be prepared describing the project and the project alternatives that will be considered in a Draft EIR scheduled for circulation July 1, 2013. The Scoping Report will describe alternatives to the Cal- Am project prior to the CPUC's hearing testimony on the proposed CPCN. Hearings will be concluded prior to the issuance of the Draft DR. The Final ElR will be issued prior to final approval of the CPCN. Although it is unusual for the administrative process for CPCN to precede the issuance of at least a draft ElR, the CPUC found that it was not in the public's interest to delay the CPCN proceedings because it would risk non-compliance with the 2016 State imposed deadline to reduce diversions of Carmel River water. The risks affecting the Cal-Am development schedule have been carefully evaluated and the professionals working on compliance for Cal-Am and the CPUC are exceptionally capable. Descriptions of contingent risk for the project should be viewed in a context that all development options have unresolved risks, and that it is not possible to define a perfect path which balances the competing objectives of all parties. Moreover, there are a number of legal uncertainties related to the path of development that can be assessed but not resolved at this time. One legal question regards the structure of commercial agreements for the desalination project. The Cal-Am proposal depends upon the CPUC acting as lead agency for environmental review which is apparently appropriate only when Cal-Am would own and operate the facilities of the desalination project. As noted below, there are conceptual advantages to public ownership of the assets for a project of this type, which may significantly enhance the prospects for political and V!) January 2013 Page 6-3 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 132, Packet Page 158 IMPLEMENTATION CONSIDERATIONS MONTEREY PENINSULA REGIONAL WATER AUTHORITY legal approvals necessary for the project to succeed. Thus there is something of a conundrum for the MPRWA--the CPUC's legal authority and sophistication to act as a lead agency for CEQA creates a schedule advantage. Moreover, the simplicity of the commercial agreements when Cal- Am owns all facilities creates schedule advantages in the CPCN administrative process, but that ownership structure creates contingent risk and political opposition to the project which could delay ultimate approval. Separate from these political considerations, the primary risks for schedule delay appear to be related to uncertainties for the development of slant wells as intake for the proposed project. Those risks are further broken down: 1. There are questions regarding the legal right of Cal-Am to install and operate slant wells in the proposed locations. It appears that there are paths to resolve this issue through commercial agreements with other entities which do have a clear legal right to install wells. How these issues are resolved is considered too speculative to be presented. 2. Design of the intake system and to a lesser extent the treatment system depends upon results from a well testing program that is not completed. That leads to uncertainty in the design which could change the project description and affect the schedule for CEQA/NEPA compliance. Moreover, Coastal Development Permits are needed both for the installation of test wells and for the ultimate intake system, which adds to uncertainty regarding when the system can be fully described. Perhaps the biggest risk to schedule is the potential that the results of a well testing program were to change the design of the intake system compared to the project description uses in CEQA documents, resulting in a change of significance such that the CEQA process would be substantially reset. It appears that Cal-Am has conservatively estimated the yield of the slant wells and thus conservatively estimated the environmental effects of the proposed intake system. However, Cal-Am has described some potential for the test well program to warrant a change from slant wells to Ranney style collectors which would require analysis in the CEQA documents of this option. 3. The nature of approval from NOAA for the installation of intake facilities is uncertain. It appears likely that approval is discretionary and would require compliance with NEPA. The administrative process for approval and the uncertainty of the outcome causes some schedule risk. The potential installation of Ranney collectors as an alternative to the slant well intake system would require discretionary approval of the NOAA. Environmental reviews in support of such an approval would have to comply with NEPA. Moreover, NOAA has verbally opined to the TAC that approval of even the slant wells may be of a discretionary nature which requires NEPA compliance. Presumably this will be resolved during scoping hearings, but the CPUC schedule for CEQA compliance may need to be adjusted if for overall schedule considerations the process is adjusted to allow concurrent review of environmental assessments under both CEQA and NEPA. Alternatively, if the CPUC elects to base its approval schedule upon only CEQA compliance and ignore potential NEPA compliance, it would add to the overall project schedule to have a separate environmental Page 6-4 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 133, Packet Page 159 MONTEREY PENINSULA REGIONAL WATER AUTHORITY IMPLEMENTATION CONSIDERATIONS review for the purpose of issuance of Federal Permits necessary for the installation of an intake system. There is a lesser risk associated with permitting the discharge of concentrated brine and other waste products from the desalination treatment process. It is possible that questions regarding the adequacy of the mitigation via blending brine with the receiving waters may be raised. It is also possible that legal questions regarding the path for regulatory approval under the distributed authority of the l\TPDES program could delay the issuance of brine disposal permits. The other primary source of schedule uncertainty and risk for the Cal-Am project, identified by Cal-Am appears to be related to the California Coastal Commission's approval of a Coastal Development Permit for the full-scale project. The Coastal Commission would normally act after Certification of Environmental Compliance and after all other permits have been obtained. Two sub-questions have been identified as unresolved. 1. What is the process and timeline to issue Coastal Development Permit for the test wells? 2. What is the timeline for issuance of Coastal Development Permit for the ultimate intake system? The first question primarily is a process question. There needs to be CEQA review of the test well program. Potentially other permits need to be issued and then the Coastal Commission needs to meet and approve the application. Although the CPUC has considered the issue of whether Cal-AM can finance the test wells, the timeline to obtain permits, install the test wells and incorporate the results from the test wells into the overall project development plan is not fully defined. The second question also causes some uncertainty as to the timeline. As pointed out by RBF, issuance of significant permits, culminating in a Coastal Development Permit can take as little as 4 months following certification of CEQA to more than 5 years with a highly controversial project. Perhaps two primary questions of interest to the California Coastal Commission are: 1. Has the project been designed to protect and enhance the Coastal and Marine Environment? 2. Does adequate public oversight of the intake system and the dependent seawater desalination project exist to adequately protect the public trust values for the coastal environment under California law? The extent to which these questions are adequately addressed during CEQA review and the issuance of a CPCN by the CPUC may largely determine the timeline for issuance of a Coastal Development Permit. Based upon the CPUC schedule for CEQA compliance and CPCN and the minimum likely schedule for issuance of major permits thereafter, we have prepared a conceptual implementation schedule for the Cal-Am project as presented on Figure 6-1. CFI} January 2013 Page 6-5 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 134, Packet Page 160 :41IRWQCB Bnife Discharge Permit d Coastal Development Perrnit .4 Test Slant Well NOD anci gOcN Desal Plant Preliminary Design Desal Plant Design/Construction p'esal Plant Startup 0, - 111- 67:-E, '2017 1/ 11. -Qv Fin,O2 ISO zotmatt . - - IMPLEMENTATION CONSIDERATIONS MONTEREY PENINSULA REGIONAL WATER AUTHORITY Figure 6-1—Conceptual Implementation Schedule for the Cal-Am Project The above schedule presumes no delays to the design and construction of the desalination plant based upon development of the intake systems. Also, no project delays are assumed to be associated with obtaining project financing. It is presumed that project financing would be needed prior to major construction activities but would not delay design or test-well activities. In response to our request Cal-Am provided an updated schedule for development of its project, shown below in Figure 6-2. Figure 6-2 —Cal-Am Proposed Implementation Schedule The Cal-Am schedule is largely consistent with the schedule we developed. However, it shows a delay in the construction of test wells and also shows the attainment of major permits will take approximately one year after completion of the DR. delays in an updated report to be issued in January. It is noted that the delay in test well construction can possibly delay the project in two ways. 1. The delay in the development of test wells adds imperative that the project description for CEQA evaluations be conservative. Completion of the test wells now takes place after presumed certification of CEQA documents. 2. The delay of the test wells requires preliminary design for the full scale project to overlap the well testing program. This has potential to delay the issuance of design/build documents for the project and could delay final project delivery. The overall delay in final delivery of the project could be as much as one year. However, impacts of the delayed test well program upon the overall development schedule will be more an unaate OT mis renon Page 6-6 January 2013 trkg) 5.1 . MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 135, Packet Page 161 MONTEREY PENINSULA REGIONAL WATER AUTHORITY IMPLEMENTATION CONSIDERATIONS Each of these risks has been assessed. We continue to believe that the project description of the intake system is sufficiently conservative to avoid a need to re-open the CEQA process following the completion of the test wells. Therefore, no delay has been assigned to the E1R phase of the schedule. However, we concur that the major permits would not be obtained until about the end of 2014. Also, issuance of the design-build documents has been delayed to allow preliminary design to fully incorporate results from the test-well program. This has delayed the project by three months compared to our original assessment. 6.2 DEEPWATER DESAL (DWD) understanding of the likely process and pitfalls associated with completing environmental review and obtaining major permits for the proposed desalination project. The schedule presented Following the presentation of our draft report, DWD presented a revised schedule for their project, consistent with their revised project description. That schedule is shown below on Figure 6-3. Figure 6-3 — DWD Proposed Implementation Sched ule ffe al—FROFE compared to the schedule developed by DWD. This major difference is examined below. DWD has suggested that an Environmental Checklist and Applicant's Environmental assurance although the completed EA has not been reviewed. DWD has presumed a schedule for their EIR/EIS of nine months from the completion of an EA. Given the level of controversy for the installation of a new seawater intake and the potential construction of a new facility for brine discharge, it seems likely that the period for scoping hearings, preparation of a draft ElR/EIS and the adjustment of the project analyses would take much longer. In the above schedule the Notice of Determination (NOD) for the E1R/EIS would take place approximately 3 months later than the NOD issued by the CPUC for the Cal Am January 2013 Page 6-7 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 136, Packet Page 162 IMPLEMENTATION CONSIDERATIONS MONTEREY PENINSULA REGIONAL WATER AUTHORITY EIR/EIS is comparable to the schedule adopted by the CPUC. Our schedule also adds four months for the issuance of a CPCN for CalAm's participation in the are are o optam male permits. But for conservatism this is shown as a critical path activity. Elkhorn Slough to connect the desalination plant to the intake and discharge facilities of the indirect impacts of the project upon the Elkhorn Slough. The 12 month period for issuance of are presumption that the ElIdiom Slough is a wetlands area of national significance. Our schedule further presumes that the issuance of NPDES permits for the intake and discharge al Perm RWQCB would not review the permits until final approvals had been given for all construction .,)cess for issuance of permits has proven to be an administrative . . to assess a time frame for the EIR/EIS had been certified and all other major permits have been issued. The process for issuance of this permit in a highly controversial project sponsored by Poseidon Resources in aca€ R-1-043 affe The assumption of six months for this process is based upon an assumption that there would be BfF1-0-eof RefF19 lar-Fe extensive review would have resolved these issues. Nonetheless the time period for issuance of this permit is highly speculative. DWD provided an updated below in Figure 6 4. DWD has overlapped major permitting activities. We believe that with assistance from public agency partners, it may be possible to overlap some activities. However, we believe that the Coastal Development permitting will not occur until DWD has completed partnership agreements with public agencies and this cannot occur until after the EIR is certified. Page 6-8 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 137, Packet Page 163 MONTEREY PENINSULA REGIONAL WATER AUTHORITY IMPLEMENTATION CONSIDERATIONS Also, we believe that either the public agency partner or the project-specific financing institution will require that all major permits be in hand prior to funding/award of a design-build contract for the desalter. Thus commencement of Desal Plant Design/Construction activities depend upon completion of these permitting activities. We have revised our generic schedule to reflect the new project description. We have eliminated Jurisdictional Perrnits as a separate activity because the new project description eliminates crossings of the Elkhorn Slough in a manner that would require a permitting process that delays other permitting agencies from considering the project. The revised project schedule is shown below on Figure 6-4. Figure 6-4 - Conceptual Implementation Sched ule for the DWD Project DWD ' -- ' ' :-31- -:,L:•• =:, . . e — ,.-,,,,1210 N:M ' TakiTY ' - ; !_ . s M -6.' ' Calf „ -. '434s • l'atd 403 ,--'s , ='1 . f ,7,7 , s 71 i , ' '; " 1 1, ',-, ' =71 ,; '', , ED_ iicl :4 ' = ' a, •:, . ,. ,_ —_ _ , --. •-•4••••_ ; : ,-,,J. :; ; ; --. , ,7,, 1. ,-- ' — — ,. .--,. -,. i,•,1-41,,,,;,fiti-4,:7,ils.,,,d-- . 1 iT Complete EIR/EIS. 1 I Negotiate Commercial Agreements II 1 NPDES Permit Amendment I1 i Coastal Development Permit I-I 'DesaVplent Prelirriinery Design II Lilt, , Desal plant' DesigniCenstructien I1 71 Desal , Plant.Startup II From their proposed schedule, we note the following: update to this report issued in January would more fully analyze the effects upon PWD rc locate the project south of the Slough greatly simplifies the permitting by eliminating this potentially controversial permit and would undoubtedly shorten the permitting schedule for the project. DAINEPI than the generic schedule we developed for the project. We continue to believe that it is reasonable to expect that the level of controversy for this project would dictate a longer period for CEQA/NEPA compliance as we have included in our schedule. estimated by DWD and is consistent With delivery via bid to a design build contractor While the implementation schedule will be revisited following the receipt of additional information from DWD about the proposed relocation of the project and the anticipated date of having a completed project description for CEQA/NEPA review, the project schedule will Fie-FEE it is difficult to discern a substantial difference in schedule between the two projects. ( , r5101) January 2013 Page 6-9 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 138, Packet Page 164 IMPLEMENTATION CONSIDERATIONS MONTEREY PENINSULA REGIONAL WATER AUTHORITY Our schedule shows the completion of the EIRJEIS in April 2014. We believe it is possible that final certification by Federal Agencies of the EIS may occur later than this date, but we believe that the State agencies should be allowed to act upon the final document by this date. Following the Certification of the EIR, we have proVided 4 months for adoption of commercial agreements by public agency partners in the project and for completion of agreements for purchase of product water by Cal-Am. Following completion of participation agreements, we have allowed a total of 10 months for the completion of NPDES permit amendments and Coastal Commission approval of the Coastal Development Permits. (4 months for NPDES and 6 months for Coastal Development). Overall we believe that the 14 month period for obtaining major permits, concluding commercial agreements and achieving financial close are reasonable estimates at this stage of development. The schedule for these major activities, comprising major permits, remains quite speculative. As noted above, it is highly speculative to assess the timeframe for obtaining . a Coastal Development Permit. We continue to believe that the Coastal Commission will want to see a comparative evaluation of subsurface intake to the deep-water-open intake proposed by DWD in order to issue permits for this project. Overall, the DWD project schedule is shown as approximately 3 months longer than the Cal-Am project schedule. We recognize that Cal-Am is slightly ahead in their permitting and this is reflected in the overall project schedules. However, given the uncertainties in both project schedules, we are unable to discern with certainty which of the two projects could be implemented more quickly. Within the accuracy of projection, the schedules are not discernible from one another. 6.3 PEOPLES MOSS LANDING (PML) PML has presented a report by SMB Environmental describing the general path for environmental review, permitting, and commercial agreements which are key to implementing a proposed project. The report does not present a detailed schedule for implementation. However, the report offers general insights into the approach to project implementation. Based upon generalized rules of thumb we endeavored to estimate a project development schedule. Two major issues were identified related to a project description and Environmental Assessment for the project: 1. Assessment of the impacts of seawater intake. 2. Assessment of the impacts of brine discharge. 6.3.1 Assessment of Impacts of Seawater Intake With respect to how the project would assess the impacts of the project's proposed use of seawater, PML has proffered that as a matter of law, the proposed desalination project's use of seawater from the intake in Moss Landing Harbor should be compared to the 60 MGD use that is currently permitted for the Moss Landing Commercial Park. Thus it is presumed in the SMB report that the intake of seawater for the desalination project would not increase the take of water from the marine environment. As such, the project's use of seawater could have no adverse impact upon the environment. In the schedule below, we have taken a different view and Page 6-10 January 2013 ( 10_ 1) MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 139, Packet Page 165 Prepare Project Description Cond uCt,Envitoritnental Assessment Complete EIR/ ElS Negotiate Commercial Agreements NPDES Permit Amend ment Coastal Development permit: Dose! Plant Preliminary,Design Desel Plant Startup Desal Plant Design/ Construction am MONTEREY PENINSULA REGIONAL WATER AUTHORITY IMPLEMENTATION CONSIDERATIONS presumed that the project's proposed use of seawater would be compared to a no-project alternative in which seawater would not be used. Thus an assessment would have to be made of the potential impacts of use of seawater. This would include baseline monitoring and complex modeling to determine the impingement and entrainment impacts of use of the intake. If PML is correct and for purposes of the Environmental Assessment, EIR/EIS and Coastal Commission Permitting, the project be presumed to use no water from the marine environment compared to the existing no-project alternative, then completion of the Project Description and Environmental Assessment phase of work could be substantially shortened from what is presented and shown on Figure 6-5. Figure 6-5 - Conceptual Implementation Schedule for the PIVIL Project It is important to note that in the schedule presented above, the time for Project Description and Environmental Assessment phases presume that a detailed assessment of the project's potential impingement and entrainment of marine organisms would have to be made. In this regard it is significant to note the prior findings of fact by the Regional Water Quality Control Board made relative to the existing NPDES permit for the Moss Landing Commercial Park (Order R3-2009- 0002, Permit CA000705). Based upon a volumetric approach that compared the Moss Landing Cement Plant Project to previous 316(b) studies at the adjacent Moss Landing Power Plant, the RWQCB found that use of up to 60 MGD of seawater through the existing intake structure in Moss Landing Harbor would have negligible potential impingement and entrainment impacts. Thus it is also possible that the project may avoid detailed assessments of the potential impacts of use of seawater and rely instead upon prior work to determine that the use of seawater would not cause a significant impact upon the marine environment. 6.3.2 Brine Discharge PML has described a "near zero liquid discharge" treatment system that would substantially reduce volumes and potential impacts from brine discharge. But that process is not described. It is thus not possible to independently assess potential impacts from the proposed discharge of brine. This leads to a great deal of uncertainty with respect to our assessment of the plan for implementation. A discharge which would require construction of a new discharge structure could take substantially longer than the generalized schedule above, a discharge that would by observation have no potential impact upon the marine environment would take substantially less time than shown in the schedule. January 2013 Page 6-11 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 140, Packet Page 166 IMPLEMENTATION CONSIDERATIONS MONTEREY PENINSULA REGIONAL WATER AUTHORITY Although it is possible to make a generalized assessment of the PML project plan for implementation as described above, that generalized schedule is not directly comparable to the analysis that is possible with the Cal-Am project which has a detailed project description and an environmental assessment which has already been subject to public review in a prior EIR. It is highly likely that as the more detailed project description is developed and Environmental Assessments are completed, controversial issues will arise that will require re-assessments and analyses which will delay processing of the environmental compliance documents and major permits. In the Cal-Am project those issues are well understood and the potential areas of controversy are well documented. Page 6-12 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 141, Packet Page 167 MONTEREY PENINSULA REGIONAL WATER AUTHORITY REFERENCES 7 REFERENCES 1. RBF Memorandum, Recommended Capacity for the Monterey Peninsula Water Supply Project (MPWSP) Desalination Plant, April 20, 2012. 2. SPI Memorandum, Monterey Desalination Study —Initial Scoping and Constraints Analysis, August 30, 2012. 3. Direct Testimony of Richard C. Svindland Before the Public Utilities Commission of the State of California, filed April 23, 2012. 4. RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project Description, April 20, 2012. 5. Cal-Am Response to SPI Questions, October 3, 2012. 6. Williams, D.E. —Design and Construction of Slant and Vertical Wells for Desalination Intake. IDA World Congress-Perth Convention and Exhibition Centre (PCEC) —Perth, Western Austrailia September 4-9, 2011 —REF: IDAWC/PER11-050. 7. Panlcratz, T. —A Review of Seawater Desal Intake, Pretreatment & Discharge Technologies. IDA —Iran 06 WDTS Proceedings September 17 & 18, 2006. 8. Ghiu, S. —18 Month Demonstration of Slant Well Intake System Pretreatment and Desalination Technology for Seawater Desalination. WaterReuse Research Conference Proceedings, June 2012. 9. Trussel Technologies Inc. Technical Memorandum, MRWPCA Outfall Hydraulic Capacity Analysis, April 18, 2012. 10. DWD Response to SPI Questions, September 12, 2012. 11. Cartier G., Corsin P. - Description of Different Water Intakes for SWRO Plants. IDA World Congress-Maspalomas, Gran Canaria —Spain October 21-26, 2007- REF: IDAWC/M1P07- 185. 12. DWD Response to SPI Questions, September 8, 2012. 13. Tenera Environmental, Preliminary Modeling of Potential Impacts from Operation of a Desalination Facility Ocean Intake, August 22, 2012. 14. Replacement Cost Approaisal Summary Report, prepared by Landmark Realty Analysts, Inc., October 3, 2011. 15. Structural Evaluation, Intake & Outfall Pipelines, Intake Pump Station and Water Storage Reservoirs, The People's Moss Landing Water Desalination Project, Moss Landing Green Commercial Park, Modd Landing, CA, August 14, 2012. 16. Monterey County Planning & Building Inspection Department; Meeting September 30, 2004, Agenda Item 6. 17. Coastal Water Project Pilot Plant Report, May 2010, MWH. 18. Outfall Video, Moss Landing Marine Lab, California State University. January 2013 Page 7-1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 142, Packet Page 168 REFERENCES MONTEREY PENINSULA REGIONAL WATER AUTHORITY 19. Seawater Outfall for Kaiser Aluminum and Chemical Corporation, Moss Landing, California, by Kaiser Engineers, 1971. 20. RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project Description, April 20, 2012. 21. Presentation—Monterey Peninsula Water Supply Project —Presentation to Monterey Co. Water Resources Agency, June 25, 2012. 22. California American Water Company, Coastal Water Project, Final Environmental Impact Report, October 30, 2009. Page 7-2 January 2013 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 143, Packet Page 169 MONTEREY PENINSULA REGIONAL WATER AUTHORITY APPENDIX A APPENDIX A - RESPONSES TO COMMENTS ON NOVEMBER DRAFT REPORT January 2013 Page A-1 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 144, Packet Page 170 I V 1 P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s D R A F T R E P O R T . N o . . • • • d e t r i m e n t l E i j r . • . . P a g e ' • . , N o .: - . D a t e o f C o m m e n t C o m m e n t s . . R e s p o n s e / A c t i o n ' . . 1 D e e p V V a t e r D e s a l , L L C N A N A 1 1 / 1 3 / 2 0 1 2 1 1 / 1 3 / 2 0 1 2 T h e t h r e e p r o p o s e d p r o j e c t s o f f e r d i f f e r i n g s o u r c e s a n d m e t h o d s o f s e c u r i n g s o u r c e s e a w a t e r f o r d e s a l i n a t i o n - m a r i n e w e l l w a t e r , s h a l l o w h a r b o r w a t e r , a n d d e e p o c e a n w a t e r . E a c h c a r r i e s i t s r e s p e c t i v e s e t o f r i s k s w i t h r e g a r d t o q u a l i t y , s o u r c e s u p p l y , r e l i a b i l i t y , a n d s c h e d u l e D V V D i s p r o p o s i n g • a c o n v e n t i o n a l s c r e e n e d , l o w v e l o c i t y , o p e n - o c e a n i n t a k e l o c a t e d a t d e p t h b e l o w t h e p h o t i c z o n e t o s e c u r e a r e l i a b l e s u p p l y o f h i g h q u a l i t y s o u r c e w a t e r f o r t h e d e s a l i n a t i o n p l a n t . O u r r e s e a r c h s h o w s t h a t t h e d e e p w a t e r i n t a k e l o c a t i o n e n s u r e s s t a b l e h i g h q u a l i t y ( l o w t u r b i d i t y ) r a w w a t e r a l o n g w i t h a n i n s i g n i f i c a n t r i s k o f i m p i n g e m e n t a n d e n t r a i n m e n t o f l i v i n g o r g a n i s m s . P r e l i m i n a r y t e s t s c o n d u c t e d s o f a r c o n f i r m o u r o b s e r v a t i o n s , a n d D W D i s p r e s e n t l y c o n d u c t i n g e x t e n s i v e o n - g o i n g w a t e r q u a l i t y m o n i t o r i n g a n d o c e a n o g r a p h i c s t u d i e s c o l l e c t i n g d a t a w h i c h w e e x p e c t t o f u r t h e r c o n f i r m t h e s e f i n d i n g s . W i t h r e s p e c t t o s u c c e s s f u l c o n s t r u c t i o n a n d r e l i a b i l i t y o f a d e e p w a t e r i n t a k e , t h e r e i s e f f e c t i v e l y z e r o n e t t e c h n i c a l r i s k i n t h e l o c a t i o n b e i n g p r o p o s e d . . r h i s m e t h o d o f o p e n w a t e r e x t r a c t i o n o f s o u r c e w a t e r f o r R O d e s a l i n a t i o n p l a n t s i s u s e d f o r m o r e t h a n 9 8 % o f t h e d e s a l i n a t i o n p l a n t s m r r p n l i v i n n n p r a t i n n w n r l d w i r i p A g r e e d . W e h a v e a c c o u n t e d f o r t h i s i n o u r e v a l u a t i o n . W e d o n o t a g r e e t h a t t h e p r o p o s e d s c r e e n e d o p e n i n t a k e c a r r i e s a s i g n i f i c a n t a d v a n t a g e a t t h i s s t a g e o f p r o j e c t d e v e l o p m e n t t o w a r r a n t i a l t e r n a t i v e s . p l a c i n g t a b o v e o t h e r a l t e a t i v e s . T h e n e c e s s a r y m a r i n e s t u d i e s a r e n o t c o m p l e t e , s o p r e s u p p o s i n g r e s u l t s i s b y d e f i n i t i o n s p e c u l a t i v e . O p e n i n t a k e s a r e n o t p r e f e r r e d b y S t a t e r e g u l a t o r s a t p r e s e n t , a n d o n l y c o n s i d e r e d f o r a p p r o v a l w h e n a s u b - s u r f a c e a l t e r n a t i v e h a s b e e n r u l e d o u t . I t t h e r e f o r e p r e s e n t s a c o m p a r a t i v e l y h i g h r e g u l a t o r y t h r e s h o l d . F i n a l l y , t h e i n s t a l l a t i o n o f t h e p r o p o s e d i n t a k e p i p e l i n e i s n o t w i t h o u t r i s k — i t w i l l e n t a i l c o n s t r u c t i o n a c t i v i t i e s i n s e n s i t i v e h a b i t a t t h a t c o u l d p r o v e c o n t r o v e r s i a l . 2 D e e p V V a t e r D e s a l , L L C 3 D e e p W a t e r D e s a l , L L C N A 1 1 / 1 3 / 2 0 1 2 B y c o n t r a s t , C a l A n n a p p e a r s t o b e p r o p o s i n g a l a r g e l y u n p r o v e n a l t e r n a t i v e i n t a k e m e t h o d u s i n g b e a c h l o c a t e d s l a n t w e l l s t o e x t r a c t s o u r c e w a t e r . T h i s m e t h o d r e q u i r e s a u n i q u e s e t o f c o n d i t i o n s t o e x i s t f o r s e r i o u s c o n s i d e r a t i o n o f t h i s m e t h o d a s a r e l i a b l e l o n g - t e r m s u p p l y o f r a w w a t e r . S l a n t w e l l s f o r s o u r c e w a t e r e x t r a c t i o n a r e e n t i r e l y d e p e n d e n t o n s i t e - s p e c i f i c g e o l o g i c a l c o n d i t i o n s . T h e r e f o r e , a t h o r o u g h k n o w l e d g e o f c o n d i t i o n s i s n e c e s s a r y i n c l u d i n g c o m p u t e r m o d e l i n g , t e s t b o r e h o l e s , p u m p t e s t i n g , a n d p i l o t t e s t i n g . E n v i r o n m e n t a l c o n c e r n s r e g a r d i n g t h e i m p a c t o f a l a r g e w e l l f i e l d i n t h e M o n t e r e y B a y M a r i n e S a n c t u a r y c a n b e e x p e c t e d , a n d c a n n o t b e a d e q u a t e l y a d d r e s s e d b y a s i n g l e t e s t w e l l . E x p e r i e n c e e l s e w h e r e s u g g e s t s t h a t d e t e r m i n a t i o n o f t h e s u i t a b i l i t y o f a n y o n e s i t e c a n c o n s u m e y e a r s o f r e s e a r c h a n d t e s t i n g p r i o r t o c o n s i d e r a t i o n f o r i m p l e m e n t a t i o n , i f a t a l l f e a s i b l e , C a l A m h a s e m p l o y e d c o m p e t e n t d e s i g n p r o f e s s i o n a l s i n e s t a b l i s h i n g t h e p r o p o s e d s u b s u r f a c e i n t a k e w e l l s , i n c l u d i n g D e n n i s W i l l i a m s o f G e o s c i e n c e , I n c . D r . W i l l i a m s i n v e s t i g a t e d a n d d e s i g n e d t h e s u c c e s s f u l s l a n t d e m o n s t r a t i o n w e l l i n D a n a P o i n t , C a l i f o r n i a , w h i c h h a s o p e r a t e d w e l l t h r o u g h o u t i t s 2 - y e a r o p e r a t i n g p e r i o d , f o l l o w i n g p r e d i c t a b l e c a p a c i t y t r e n d s . I t i s o u r o p i n i o n t h a t C a l A m a n d i t s e n g i n e e r i n g t e a m a r e e n g a g e d i n a c o n s e r v a t i v e , d e l i b e r a t i v e d e s i g n a p p r o a c h c o n s i s t e n t w i t h a s u c c e s s f u l o u t c o m e . 4 D e e p W a t e r D e s a l , L L C N A 1 1 / 1 3 / 2 0 1 2 I n a d d i t i o n , t e s t w e l l s f o r t h e C a l A m p r o j e c t h a v e n o t y e t b e e n p e r m i t t e d , c o n s t r u c t e d o r o p e r a t e d t o d e m o n s t r a t e t h e f e a s i b i l i t y o f t h i s a p p r o a c h f o r s o u r c e w a t e r e x t r a c t i o n . N o r c a n t h e p o t e n t i a l i m p a c t o n e x i s t i n g a q u i f e r w i t h d r a w a l r a t e s a n d q u a l i t y b e a c c u r a t e l y e s t i m a t e d u n t i l t h e f u l l - s c a l e s y s t e m i s a c t u a l l y o p e r a t i o n a l ; w h i c h c o u l d c a u s e d e l a y s i n o p e r a t i o n i f a d d i t i o n a l t r e a t m e n t c o m p o n e n t s a r e n e e d e d o r p l a n t c a p a c i t i e s c h a n g e . T h e t i m e l i n e t o p e r m i t , c o n s t r u c t a n d a d e q u a t e l y l e s t s l a n t w e l l t e c h n o l o g y a t t h e C a l A n n s i t e m a y l i k e l y c o n s u m e a m i n i m u m o f 1 2 t o 1 6 m o n t h s ( v e r s u s t h e 6 m o n t h s e s t i m a t e d b y C a l A m a n d i n c l u d e d i n t h e S P I r e p o r t , r e f e r e n c e F i g u r e 6 - 1 ) . I f t h e t e s t w e l l i s n o t s u c c e s s f u l a f t e r t e s t i n g , s i g n i f i c a n t s c h e d u l e i m p a c t s w o u l d r e s u l t , a n d a n a l t e r n a t i v e s o u r c e w a t e r e x t r a c t i o n m e t h o d w i l l h a v e t o t h e n b e d e v e l o p e d , p e r m i t t e d a n d c o n s t r u c t e d , f u r t h e r d e l a y i n g t h e s c h e d u l e . C a l A m ' s s c h e d u l e f o r i n s t a l l a t i o n o f t h e p r o p o s e d t e s t w e l l i s b e i n g a d j u s t e d b a s e d o n r e v i s e d i n f o r m a t i o n . T h e i m p a c t s o f t h i s c h a n g e w i l l b e a d d r e s s e d i n t h e s u p p l e m e n t a l r e p o r t 2 0 1 3 . s c h d u l e d f o r J a n u a r y 5 D e e p W a t e r D e s a l , L L C N A 1 1 / 1 3 / 2 0 1 2 T h e P e o p l e ' s M o s s L a n d i n g p r o j e c t p r o p o s e s t o e x t r a c t s o u r c e w a t e r f r o m t h e M o s s L a n d i n g H a r b o r . A g a i n , e x p e r i e n c e c o n f i r m s t h a t h a r b o r w a t e r i s o f e x t r e m e l y p o o r a n d v a r i a b l e q u a l i t y a n d w i l l r e q u i r e , a t a m i n i m u m , a d d i t i o n a l p r e t r e a t m e n t p r o c e s s s t e p s t o r e l i a b l y p r o d u c e f e e d w a t e r t o t h e R D m e m b r a n e t h a t m e e t t h e S W R O m e m b r a n e s p e c i f i c a t i o n s . T h e f i r s t f a i l e d d e s a l i n a t i o n p r o j e c t a t M o s s L a n d i n g i n 2 0 0 6 a t t e m p t e d t o u s e t h e M o s s L a n d i n g H a r b o r w a t e r b u t h a d i t s p i l o t t e s t i n g t h w a r t e d b y s o u r c e w a t e r q u a l i t y i s s u e s . U n t i l t h e p r o p o s e d p r e t r e a t m e n t I s e x t e n s i v e l y p i l o t t e s t e d , i t i s n o t p o s s i b l e t o f i n a l i z e e i t h e r t h e d e s i g n o r t h e c o s t o f t h e p r o p o s e d p r o j e c t . P i l o t t e s t i n g f o r p r e t r e a t m e n t o f h i g h l y c o n t a m i n a t e d s o u r c e w a t e r s w o u l d t y p i c a l l y r e q u i r e 1 2 - m o n t h s t o c a p t u r e s e a s o n a l e f f e c t s o n t h e p r o p o s e d p r o c e s s . " ' " " ' ' " ' ' ' ' ' ' " " ' ' ' ' ' ` " " ' " ' l ' " u ` " " ' " ' ' ' ' " e a ' ' ' " ' d t h " d i s a g r e e w i t h t h e c h a r a c t e r i z a t i o n t h a t i t w a s " t h w a r t e d " b y w a t e r q u a l i t y i s s u e s . T h e s t u d y e v a l u a t e d U F p r e t r e a t m e n t a n d f o u n d i t s u c c e s s f u l . P M L i s p r o p o s i n g t w o - s t a g e p r e t r e a t m e n t i n c o r p o r a t i n g g r a n u l a r m e d i a f i l t e r s f o l l o w e d b y U F . W e c o n s i d e r t h i s a p p r o a c h c o n s i s t e n t w i t h t h e p r e v i o u s w o r k a n d a d e q u a t e l y c o n s e r v a t i v e . T h e y h a v e f u r t h e r p r o p o s e d t o c o n d u c t a 1 2 - m o n t h p i l o t p r o g r a m ( i n c l u d e d i n t h e i r s c h e d u l e ) t o v a l i d a t e t h e o v e r a l l p r o c e s s d e s i g n . T h e c o s t s f o r t h e i r p r e t r e a t m e n t s y s t e m a s p r o p o s e d a r e I n c l u d e d i n o u r e v a l u a t i o n , a l o n g w i t h t h e s c h e d u l e i m p a c t s o f t h e i r p i l o t 6 D e e p W a t e r D e s a l , L L C N A 1 1 / 1 3 / 2 0 1 2 D W D r e s p e c t f u l l y s u b m i t s t h a t t h e p o t e n t i a l c o s t , r i s k a n d s c h e d u l e i m p a c t s o f t h e t h r e e c a n d i d a t e m e t h o d s o f s o u r c e w a t e r e x t r a c t i o n a r e n o t e q u i v a l e n t . C a l A m ' s p r o p o s e d s l a n t w e l l a l t e r n a t i v e i n t a k e c l e a r l y o f f e r s t h e g r e a t e s t r i s k a s t h e r e i s o n l y o n e s u c c e s s f u l l y o p e r a t i n g , l a r g e c a p a c i t y , i . e . ( g r e a t e r t h a n 5 m g d ) S W R O d r i n k i n g w a t e r f a c i l i t y u t i l i z i n g s l a n t w e l l t e c h n o l o g y a n y w h e r e i n t h e w o r l d ( O m a n S u r ) o f w h i c h w e a r e a w a r e . T h e S u r p l a n t t a k e s a d v a n t a g e o f m e e t i n g a l l s i t e - s p e c i f i c r e q u i r e m e n t s s u p p o r t i n g b e a c h w e l l s ; a n d w a s b u i l t a l t e r 3 + y e a r s o f t e s t i n g . t o p r o v e t h i s w a s p o s s i b l e w i t h t h e s u p p o r t o f e x t e n s i v e c o m p u t e r m o d e l i n g a n d f i e l d t e s t i n g . T h e 2 1 m g d f a c i l i t y r e q u i r e s 3 2 w e l l s a n d t h e w e l l f i e l d c o n s u m e s m o r e t h a n 1 2 a c r e s . S e e a b o v e r e s p o n s e r e g a r d i n g t h e s l a n t w e l l i s s u e . 7 D e e p W a t e r D e s a l , L L C N A 1 1 / 1 3 / 2 0 1 2 T h e P e o p l e ' s p r o j e c t h a s t h e n e x t h i g h e s t r i s k a s s o c i a t e d w i t h t h e d e s i g n a n d o p e r a t i o n o f a p r e t r e a t m e n t s y s t e m t h a t c a n r e l i a b l y t r e a t t h e v e r y p o o r q u a l i t y h a r b o r s o u r c e w a t e r t o t h e v e r y h i g h s t a n d a r d s r e q u i r e d b y S W R O m e m b r a n e . T h i s r i s k c a n o n l y b e m i t i g a t e d b y e x t e n s i v e p i l o t t e s t i n g o f d u r a t i o n o f a t l e a s t 1 2 - m o n t h s t o a c c o u n t f o r s e a s o n a l w a t e r q u a l i t y c h a n g e s a n d f o r a c c u r a t e s o u r c e w a t e r c h a r a c t e r i z a t i o n ; i m p a c t o n t h e p r o p o s e d p r e t r e a t m e n t p r o c e s s e s , a n d r e m o v a l d u e t o c o n t a m i n a n t s s u c h a s o i l a n d g r e a s e a n d h a r m f u l a l g a l b l o o m s . T h e P M L p r o j e c t a n d o u r e v a l u a t i o n i n c l u d e s t h e r e c o m m e n d e d m e a s u r e s . P a g e 1 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 145, Packet Page 171 M P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s " D R A F T R E P O R T . . . . . r i d . . . . c d d i d i d d i e y . - . - P a o l a P a g e • N o . D a t e o f ' C o m m e n t ' C o m m e n t s . . .. . . - . . . R e s p o n s e / A c t i o n ' • • ' — ' " " ' D e e p V V a t e r D e s a l , L L C N A 1 1 / 1 3 / 2 0 1 2 A l l t h r e e p r o p o s e d p r o j e c t s h a v e p r o p o s e d r e v e r s e o s m o s i s a s t h e d e s a l i n a t i o n p r o c e s s a n d t h e 0 & M c o s t s a s s o c i a t e d f o r e a c h p r o j e c t s h o u l d b e r o u g h l y e q u i v a l e n t s o f a r a s t h e R O s y s t e m i s c o n c e r n e d . H o w e v e r , b o t h t h e C a l A m a n d P e o p l e s p r o j e c t s c o n t a i n p r o c e s s e q u i p m e n t t h a t i s n o t r e q u i r e d f o r t h e D W D p r o j e c t . C a l A m h a s t h e a d d e d 0 & M c o s t s a s s o c i a t e d w i t h i t s s l a n t w e l l f i e l d a n d P e o p l e ' s h a s t h e a d d e d c o s t s a s s o c i a t e d w i t h i t s a d d i t i o n a l p r e t r e a t m e n t s t e p s ( u l t r a f i l t r a l i o n ) . Y e t , t h e S I D I r e p o r t h a s a s s i g n e d t h e h i g h e s t 0 & M c o s t t o t h e D W D p r o j e c t . i n t u i t i v e l y , t h i s d o e s n o t s e e m t o b e a t e c h n i c a l l y s o u n d c o n c l u s i o n . H o w e v e r , w i t h o u t r e v i e w i n g t h e 0 & M c o s t w o r k - u p p r e p a r e d b y S P I w e c a n n o t b e m o r e s p e c i f i c i n a s c e r t a i n i n g h o w S P I a r r i v e d a t t h i s c o n c l u s i o n . D W D w o u l d a p p r e c i a t e t h e o p p o r t u n i t y t o r e v i e w S P I ' s c o s t e v a l u a t i o n w o r k s h e e t t o a s s e s s w h e t h e r a n y i n c o r r e c t a s s u m p t i o n s m a y h a v e b e e n i i c p r i i n h e p v a l l i n l i n n • B a s e d o n s u b s e q u e n t c o r r e s p o n d e n c e b e t w e e n D V V D a n d S R I , w e f e e l w e h a v e t r a c e d t h e s o u r c e o f t h e d i s c r e p a n c y p r i m a r i l y t o t h e l i n e i t e r n l i s t e d a s " O t h e r P r o p o n e n t E x p e n s e s " , w h i c h w e f a i l e d t o f u l l y u n d e r s t a n d f r o m t h e D W O s u p p l i e d c o s t s o r i g i n a l l y . T h e q u a n t i t y l i s t e d i n t h e d r a f t r e p o r t o v e r l a p s w i t h O & M l a b o r e s t i m a t e i n c l u d e d i n o u r c o s t e v a l u a t i o n . T h e O & M c o s t s w i l l b e r e v i s e d i n t h e f i n a l r e p o r t t o r e f l e c t t h e n e w i n f o r m a t i o n . 9 D e e p V V a t e r D e s a l , L L C N A 1 1 / 1 3 / 2 0 1 2 T h e m o s t D V V D n u m b e r s u b m i s s i o n P M L i d e n t i f i e d 0 & M n u m b e r s s i g n i f i c a n t l y t h e 5 . 5 k A F Y n o t a b l e d i f f e r e n c e i s t h e I n c l u s i o n o f a r o w l a b e l e d " O t h e r P r o p o n e n t E x p e n s e s " o n l y p r o j e c t . T h e C a l A m a n d P M L p r o j e c t s h a v e n o c o s t s i d e n t i f i e d i n t h i s r o w , b u t S P I a s s i g n e d f r o m D W D ' s i n p u t t h a t i s d u p l i c a t e d i n o t h e r c o s t s i d e n t i f i e d a s C h e m i c a l s a n d O & M L a b o r . c l e a r l y i d e n t i f i e d w h a t w a s i n o u r c o s t s . W e k n o w f r o m o u r o w n a n a l y s i s o f t h e C a l p r o j e c t s t h a t t h e y h a v e s i m i l a r " O t h e r P r o p o n e n t E x p e n s e s . T h e f i g u r e s p r o v i d e d f o r C h e m i c a l s h i g h e r t h a n C a l A m w h i l e w e i n c l u d e d c h e m i c a l s i n o u r " E x p e n d a b l e s " c a t e g o r y . " O & M L a b o r ' i n o u r s u b m i s s i o n s i z e d f o r t h e p l a n t a n d d e s i g n c h a r a c t e r i s t i c s . A s a r e s u l t , C a s t s w e r e o v e r s t a t e d b y $ 2 . 9 4 m i l l i o n f o r t h e 9 1 c A F Y p l a n t a n d o v e r s t a t e d b y $ 2 . 7 8 m i l l i o n s i z e d p l a n t . W e a r e i n s e r t i n g T a b l e E S - 2 f r o m t h e S P I r e p o r t w i t h D W D ' s c o r r e c t e d b e l o w e l i m i n a t i n g t h e d u p l i c a t e d c o s t s a n d o v e r s t a t e d e n e r g y c o s t s . t o t h e a O u r A m a n d i s W e c l e a r l y t h e f o r S e e r e s p o n s e a b o v e . T a b lo E .S .2 C A M s D M 5 4 1 C h a r t D W I , 5 .1 1 A .” S U , 5 v . , s u n S I M , I n e , S 3 4 1 S I , . 5 1 1 1 ' " 5 . 1 Z O O P S I M P S M . . 1 1 s o s o s t m M P 3 1 4 7 . . „ 5 1 , 1 M U 5 1 4 4 I . C . I l d . . . s / r e v o n o r l N . . . . 5 1 .1 1 3 5 1 .4 .0 D W I . = P O S IA 6 5 . 9 5 7 .1 4 5 1 6 1 $ 1 .3 1 ( 9 . V . , . . 0 . . M . P W O 5 1 -1 1 S L O I i a a l 5 1 3 1 s o .,, 7 0 . . s •1 1 .1 3 P . 7 7 1 1 1 .1 P I O 5 1 3 .1 i n . M I . I 7 y . , , , , , , , i n d r r r V / . . . r . , 1 . P I 1 1 0 1 1 1 4 O m m i c k . i l n . 1 . 1 . 1 1 . 1 1 , , W . 1 . . . l e a t + . s 1 . o 5 M M 1 1 - l5 P S O 0 1 1 4 .1 a m r I l a b 5 1 1 1 7 4 . . T O T A L $ 0 .1 1 I U . . 0 1 M 1 r s ... o w . I r y d o u b l e i m u n a l n e s . A g i v a r . 4 . 0 1 . 1 1 y r . . u x i t t . M I . 5 1 / . 1 0 D e e p V V a t e r D e s a l , L L C N A 1 1 / 1 3 / 2 0 1 2 S c h e d u l e f o r e c a s t i n g i s b y n a t u r e s p e c u l a t i v e . H o w e v e r , w e h a v e n o t e d t h a t F i g u r e 6 - 1 - C o n c e p t u a l I m p l e m e n t a t i o n S c h e d u l e f o r t h e C a l A m P r o j e c t f o r e c a s t s t h e s l a n t w e l l t e s t p r o g r a m w i l l b e c o m p l e t e d i n 9 - m o n t h s c o m m e n c i n g Z ' d q u a r t e r o f 2 0 1 3 ; a n d t h e g e n e r i c s c h e d u l e p r o p o s e d b y S P I c o n t a i n s t h e f o l l o w i n g c o n d i t i o n " . . . p r e s u m e s n o d e l a y s t o t h e d e s i g n a n d c o n s t r u c t i o n o f t h e d e s a l i n a t i o n p l a n t b a s e d u p o n d e v e l o p m e n t o f t h e i n t a k e s y s t e m s . " ( R e f . p a g e 5 7 ) . W e s i n c e r e l y q u e s t i o n w h e t h e r t h i s a s s u m p t i o n i s r e a s o n a b l e g i v e n t h e u n c e r t a i n t y o f p e r m i t t i n g , c o n s t r u c t i o n a n d t h e r e q u i r e d t e s t p e r i o d d u r a t i o n d i s c u s s e d a b o v e . T h e o n l y e x p e r i e n c e w i t h l a r g e c a p a c i t y s l a n t w e l l s i n C a l i f o r n i a i s a n o n g o i n g s l a n t w e l l t e s t p r o g r a m a t D o h e n y B e a c h i n s o u t h e r n C a l i f o r n i a b e i n g c o n d u c t e d f o r t h e S o u t h O r a n g e C o a s t a l O c e a n D e s a l i n a t i o n P r o j e c t t h a t c o m m e n c e d i n 2 0 0 5 a n d i s n o t s c h e d u l e d t o c o n c l u d e u n t i l 2 0 1 3 . I t w o u l d b e h e l p f u l i f S P I w o u l d s h a r e t h e r a t i o n a l e a n d b a s i s f o r i t s s t a l e d a s s u m p t i o n . I t s h o u l d a l s o b e n o t e d t h a t t h e C a l A m s c h e d u l e w o u l d b e s u b s t a n t i a l l y i m p a c t e d s h o u l d t h e t e s t p r o g r a m n o t b e u l t i m a t e l y s u c c e s s f u l , w h i c h w o u l d e n t a i l g o i n g t o a n e n t i r e l y n e w m e t h o d f o r s o u r c e w a t e r e x t r a c t i o n . W e b e l i e v e t h a t i t I s a p p r o p r i a t e t o r e f l e c t t h i s r i s k e l e m e n t i n t h e e v a l u a t i o n , w h i c h i n o u r v i e w i s s u b s t a n t i a l . W e w i l l a d j u s t C a l A m ' s s c h e d u l e f o r t h e t e s t w e l l p r o g r a m a c c o r d i n g t o n e w i n f o r m a t i o n r e c e i v e d I n a s u p p l e m e n t a l r e p o r t d u e i n J a n u a r y 2 0 1 3 . C a l A m ' s e n g i n e e r i n g t e a m i s a c t i v e l y e n g a g e d i n t h e d e s i g n a n d p r o p o s e d c o n s t r u c t i o n s e q u e n c e f o r t h e t e s t w e l l s , a n d w e f i n d t h e i r s c h e d u l e c r e d i b l e f r o m a n e n g i n e e r i n g a n d c o n s t r u c t i o n p e r s p e c t i v e . P e r m i t t i n g c o n c e r n s a s s t a t e d , s p e c u l a t i v e — b u t w e d o n o t e a p r e f e r e n c e o f S t a t e r e g u l a t o r s f o r s u b s u r f a c e I n t a k e s a t p r e s e n t w h i c h c o u l d s m o o t h t h e i r p a t h t o a p p r o v a l . P a g e 2 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 146, Packet Page 172 M P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s D R A F T R E P O R T N o . . . C o m m e n t , B y r P a g e ' . , . D a t e , o f - . C o m m e n t i i C o m M e t s R e s p o n s e / A c t i o n 1 1 D e e p W a t e r D e s a l , L L C N A 1 1 / 1 3 / 2 0 1 2 W i t h r e s p e c t t o t h e C o n c e p t u a l I m p l e m e n t a t i o n S c h e d u l e f o r t h e D W D P r o j e c t , F i g u r e 6 - 2 , w e n o t e t h a t t h e s c h e d u l e l i s t e d b y S P I i s s u b s t a n t i a l l y l o n g e r t h a n w e f o r e c a s t . T h e r e a r e t w o t a s k s I t e m s t h a t w e b e l i e v e s h o u l d b e r e v i s e d : T a s k I t e m 6 . D e s a i P l a n t P r e l i m i n a r y D e s i g n - D V V D c a n e x e c u t e p r e l i m i n a r y d e s i g n c o n c u r r e n t l y w i t h t h e p r i o r t a s k i t e m s . U n l i k e e i t h e r t h e C a l A m o r t h e P e o p l e s p r o j e c t s , D W D c a n a c c u r a t e l y d e t e r m i n e i t s d e s i g n s o u r c e w a t e r q u a l i t y ( a n d i s p r e s e n t l y c o l l e c t i n g t h e n e c e s s a r y d a t a n e e d e d w i t h i n s t r u m e n t s d e p l o y e d i n t h e o c e a n o f f M o s s l a n d i n g a n d r e g u l a r w a t e r s a m p l i n g ) . C a l A m c a n n o t c h a r a c t e r i z e i t s d e s i g n f e e d w a t e r u n t i l t h e c o m p l e t i o n o f t h e s l a n t w e l l t e s t p r o g r a m . A l t h o u g h C a l A m h a s t r i e d t o a n t i c i p a t e t h e r a w w a t e r q u a l i t y a n d i n c o r p o r a t e d a d d i t i o n a l p r e t r e a t m e n t c o m p o n e n t s t o p o s s i b l y t r e a t t h e f e e d w a t e r , o n l y a n a n a l y s i s o f t h e f e e d w a t e r f r o m t h e a c t u a l t e s t e d i n - f i e l d c o n d i t i o n s w i l l d i r e c t t h e e x t e n t a n d a s s o c i a t e d c a p i t a l a n d o p e r a t i o n a l c o s t i m p a c t t h i s w i l l h a v e o n t h e p l a n t . L i k e w i s e , t h e P e o p l e s p r o j e c t m u s t f i r s t c o m p l e t e i t s 1 2 - m o n t h p i l o t t e s t i n g f o r s i m i l a r r e a s o n s . T a s k I t e m 3 . J u r i s d i c t i o n a l P e r m i t s - A s n o t e d i n t h e r e p o r t , D V V D h a s p r e v i o u s l y b e e n b a r r e d f r o m d i s c l o s i n g c e r t a i n i n f o r m a t i o n r e l a t e d t o i t s p r o j e c t d u e t o a b i n d i n g n o n - d i s c l o s u r e a g r e e m e n t . W e a r e p l e a s e d t o n o w b e a b l e t o d i s c l o s e , t h a t D V V D i s c u r r e n t l y e n g a g e d i n e x c l u s i v e n e g o t i a t i o n s f o r a b u i l d i n g s o u t h o f E l k h o m S l o u g h a s a n a l t e r n a t i v e l o c a t i o n f o r t h e s e a w a t e r r e v e r s e o s m o s i s p l a n t p o r t i o n t h e p r o j e c t . T h i s w i l l r e s u l t i n a r e d u c t i o n o f c a p i t a l a r i d a . p e r a t i n g c o s t s a n d a n a c c e l e r a t i o n o f t h e s c h e d u l e r e l a t i v e t o t h e J u r i s d i c t i o n a l P e r m i t s a s i t w i l l n o t b e n e c e s s a r y r o u t e p i p i n g t h a t c r o s s e s t h e E l k h o r n S l o u g h . W h i l e w e a c k n o w l e d g e t h e S l o u g h d o e s h a v e l o g i s t i c a l c h a l l e n g e s , t h i s a l t e r n a t i v e e f f e c t i v e l y e l i m i n a t e s t h e 1 2 - m o n t h s c h e d u l e i t e m a s s o c i a t e d w i t h s u c h J u r i s d i c t i o n a l p e r m i t t i n g . T h e a s s o c i a t e d c o s t s s a v i n g s a r e $ 5 . 5 m i l l i o n i n C a p E x f o r t h e 9 k A F Y p l a n t s i z e a n d $ 2 . 7 m i l l i o n f o r t h e 5 . 5 k A F Y p l a n t s i z e . A d d i t i o n a l l y , t h e a n n u a l 0 & M C o s t s a r e l o w e r b y $ 1 0 7 / A F Y f o r a t o t a l c o s t o f $ 1 , 9 1 0 / A F Y f o r t h e 9 k A F Y p l a n t a n d $ 2 , 2 9 2 / A F Y f o r t h e 5 . 5 k A F Y s i z e d p l a n t . T h e p r o p o n e n t ' s u p d a t e d s c h e d u l e w a s s o l i c i t e d s i n c e t h e o r i g i n a l d r a f t a n d h a s b e e n p r e s e n t e d i n t h e r e p o r t . I t h a s n o t b e e n f u l l y a n a l y z e d b u t n e i t h e r i s i t f u l l y a c c e p t e d . W i t h r e s p e c t t o T a s k 3 , t e x t h a s b e e n a d d e d t o t h e r e p o r t t o n o t e t h a t a r e l o c a t i o n o f t h e p r o j e c t a s i n d i c a t e d w o u l d s u b s t a n t i a l l y l e s s e n t h e p r o j e c t s c h e d u l e d u r a t i o n . H o w e v e r , t h i s h a s n o t b e e n f u l l y a n a l y z e d s i n c e t h i s i n f o r m a t i o n c a m e t o l i g h t s o l a t e . W i t h r e s p e c t t o T a s k 6 , p r o p o n e n t s h a v e i n d i c a t e d a t r e m e n d o u s s c h e d u l e a d v a n t a g e i n a l l p h a s e s o f d e s i g n a n d c o n s t r u c t i o n c o m p a r e d t o t h e g e n e r i c s c h e d u l e p r e s e n t e d b y t h e C o n s u l t a n t s . B o t h p o i n t s o f v i e w a r e p r e s e n t e d i n t h e r e p o r t . 1 2 D e e p W a t e r D e s a l , L L C N A 1 1 / 1 3 / 2 0 1 2 B e c a u s e o f t h e c r i t i c a l n a t u r e t h e d e s a l i n a t i o n p l a n t a n d t h e n e c e s s i t y t o m e e t t h e c e a s e a n d d e s i s t o r d e r d e a d l i n e , w e r e s p e c t f u l l y s u b m i t t h a t t h e D W D p r o j e c t o f f e r s t h e l o w e s t r i s k o f s i g n i f i c a n t c h a n g e s i n c o s t a n d s c h e d u l e . B e c a u s e t h e D W D p r o j e c t r e l i e s o n a c o n v e n t i o n a l i n t a k e f o r t h e s u p p l y o f h i g h q u a l i t y s o u r c e w a t e r f o r d e s a l i n a t i o n , t h e r i s k e l e m e n t s f o r t h e D V V D p r o j e c t a r e l i m i t e d t o r e g u l a t o r y r e v i e w a n d p e r m i t t i n g . W h i l e b o t h t h e C a l A m a n d P e o p l e s p r o j e c t a r e a l s o s u b j e c t t o r e g u l a t o r y a n d p e r r n i t t i n g r i s k , t h e y h a v e a d d e d s i g n i f i c a n t , m a t e r i a l t e c h n i c a l r i s k a s w e l l . I n t h e c a s e o f C a l A m , t h e r i s k a s s o c i a t e d w i t h r e l y i n g o n a n o v e l a n d l a r g e l y u n p r o v e n a n d s i t e s p e c i f i c m e t h o d o f s o u r c e w a t e r e x t r a c t i o n ; a n d i n t h e c a s e o f t h e P e o p l e s p r o j e c t , t h e c h a l l e n g e o f r e l i a b l y p r o d u c i n g h i g h q u a l i t y R O f e e d w a t e r f r o m a v e r y c o n t a m i n a t e d a n d h i g h l y v a r i a b l e s o u r c e w a t e r . W e b e l i e v e t h e a d v a n t a g e s c i t e d a r e e x c e s s i v e l y s p e c u l a t i v e g i v e n t h e p r e s e n t s t a t e o f p r o j e c t d e v e l o p m e n t ; a n d d o n o t w a r r a n t a d e s c r i b e d p r e f e r e n c e i n o u r e v a l u a t i o n . 1 3 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 S i n g l e p a s s R O s y s t e m p r o p o s e d b y D W D a n d P M L - w h i l e C a l A m p a r t i a l d o u b l e o r t w o p a s s y s t e m - w h a t a r e a d v a n t a g e s / d i s a d v a n t a g e s a n d w h a t i s c o s t f a c t o r f o r s i n g l e v s d o u b l e ? A l l t h r e e p r o j e c t s w o u l d s u p p l y w a t e r i n t o t h e C a l A m d i s t r i b u t i o n s y s t e m t o i n t e g r a t e w i t h e x i s t i n g s u p p l i e s . F o r a n a p p l e s t o a p p l e s c o m p a r i s o n , w e s a w i t a s n e c e s s a r y t o c o m p a r e t h e p r o j e c t s o n t h e b a s i s o f a c h i e v i n g a c o n s i s t e n t q u a l i t y o f p r o d u c t w a t e r . S i n g l e a n d p a r t i a l - d o u b l e p a s s R O s y s t e m w o u l d p r o d u c e m a r k e d l y d i f f e r e n t q u a l i t i e s o f p r o d u c t w a t e r — s o w e p e r f o r m e d o u r e v a l u a t i o n o n t h e b a s i s d a l ! p r o j e c t e d i n c o r p o r a t i n g a p a r t i a l s e c o n d p a s s R O s y s t e m . I t s h o u l d b e n o t e d t h a t t h i s w a s i n a n e f f o r t t o p r o v i d e a b a l a n c e d e v a l u a t i o n o f t h e p r o j e c t s . A c t u a l f a c i l i t y c o n s t r u c t i o n c o u l d p r o c e e d o n e i t h e r b a s i s , s u b j e c t t o a g r e e m e n t o f i n t e r e s t e d p a r t i e s a n d S t a t e r e g u l a t o r s . 1 4 S u e M c C l o u d E S - 7 1 1 / 1 3 / 2 0 1 2 I f P M L c a n n o t u s e a l l o r p a r t o f i n t a k e i n f r a s t r u c t u r e - w h a t i s c o s t d i f f e r e n t i a l P M L h a s i n c l u d e d 5 3 . 0 M i n t h e i r c o s t e s t i m a t e s t o p r o v i d e u p g r a d e s t o t h e i r e x i s t i n g i n t a k e a n d o u t f a l l f a c i l i t i e s . T h i s , i n c o n c e r t w i t h t h e 3 0 % o v e r a l l c o s t c o n t i n g e n c y i n c l u d e d i n o u r e s t i m a t e s i s s u f f i c i e n t t o a c c o u n t f o r p o t e n t i a l c o s t s a t t h i s s t a g e . 1 5 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 D o e s e n e r g y c o s t u s e M R W M D p o w e r - a l s o g r e e n a s p e c t i f t h i s e n e r g y g e n e r a t e d f r o m l a n d f i l l m e t h a n e i s u s e d . E n e r g y c o s t s w e r e s u p p l i e d b y t h e i n d i v i d u a l p r o p o n e n t t e a m s . W e v a l i d a t e d t h e i r c o s t s t o a c e r t a i n e x t e n t , b u t w e r e n o t i n a p o s i t i o n t o r e c o m m e n d s o u r c e s o f e n e r g y . I n g e n e r a l , p r o p o n e n t t e a m s h a v e a n i n c e n t i v e t o p r o c u r e t h e l o w e s t c o s t s o u r c e s o f e n e r g y f o r t h e i r p r o p o s e d p r o j e c t o n t h e i r o w n . P a g e 3 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 147, Packet Page 173 I V I P R 1 N A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s D R A F T R E P O R T , N o . . • • • P a g e -• ' , - . ' N O . . . D a t e o f : C o m m e n t ; . , . , . • C o m m e n t s . .• — • , - - . R e s p o n s e / A c t i o n 1 6 S u e M c C l o u d E S - 7 1 1 1 1 3 / 2 0 1 2 I m p l e m e n t a t i o n s c h e d u l e s e x p a n d f o r e a c h o f 7 p o i n t s , w h e r e i s e a c h p r o j e c t n o w i n t h e p r o c e s s a n d w h a t s t e p s a r e y e t t o b e a c c o m p l i s h e d a n d i n w h a t t i m e f r a m e . T h e s c h e d u l e s s h o w e a c h p r o j e c t ' s f o r e c a s t d e v e l o p m e n t f r o m O c t o b e r 2 0 1 2 o n . T h e s c h e d u l e s t a r t d a t e a n d s u b s e q u e n t a c t i v i t i e s a r e o u r b e s t e s t i m a t e o f p r o g r e s s g o i n g f o r w a r d . 1 7 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 S a w n o m e n t i o n o f l e g a l a c t i o n i m p a c t f o r a n y o f t h e p r o j e c t s . T h e l e g a l r i s k o f t h e v a r i o u s p r o j e c t s w a s o u t s i d e t h e s c o p e o f o u r e v a l u a t i o n . 1 8 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 C a l a m p r o j e c t - d o c o s t s r e f l e c t 8 s l a n t w e l l s o r 5 a n d s h o u l d n ' t c o s t s h a v e b o t h c o s t s ? T h e c o s t s p r e s e n t e d f o r t h e 9 k A F Y p r o j e c t r e f l e c t i n s t a l l a t i o n o f 7 s l a n t w e l l s ; c o s t s f o r t h e 5 k A F Y p r o j e c t r e f l e c t i n s t a l l a t i o n o f 5 s l a n t w e l l s . E s t i m a t e s f o r b o t h f a c i l i t y s i z e s a r e p r e s e n t e d I n t h e r e p o r t . W e f e e l s u f f i c i e n t i n f o r m a t i o n I S i n c l u d e d i n t h e r e p o r t r e g a r d i n g t h e S V G B f o r t h e p u r p o s e s o r o u r e v a l u a t i o n . D W D i s p r o p o s i n g t o p r o p o r t i o n a l l y s h a r e c o s t s a s s o c i a t e d w i t h i n t a k e a n d b r i n e d i s p o s a l f a c i l i t i e s p r o p o r t i o n a l l y a m o n g t h e P h a s e 1 a n d 2 p r o j e c t s . R e m a i n i n g p r o j e c t f a c i l i t i e s w o u l d o n l y b e c o n s t r u c t e d f o r t h e P h a s e 1 p l a n t r e q u i r e m e n t a n d c o s t s a r e r e f l e c t i v e o f t h a t . 1 9 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 W o u l d b e h e l p f u l t o h a v e a m a p w i t h S V G B s u p e r i m p o s e d o v e r t h e C a l A m p r o j e c t . 2 0 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 D W D t a l k s a b o u t P h a s e s 1 a n d 2 - y e t t e x t s e e m s t o t a l k a b o u t i n f r a s t r u c t u r e b e i n g d o n e a t t h e o u t s e t - i f s o , w i l l t h e d e s a l p r o j e c t b e h e l p i n g t o p a y f o r t h e l a r g e r c o s t p r o j e c t 2 1 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 B o t h D V V D a n d P M L u s e c o r r o s i o n i n h i b i t o r s - I s t h i s f o r i n t a k e a n d o u t f l o w p i p e s ? A s i t d o e s n o t a p p e a r i n t h e C a l A m c o s t s , I n s e r v i c e o f a c h i e v i n g a b a l a n c e d e v a l u a t i o n , w e w i l l r e m o v e t h e u s e o f c o r r o s i o n i n h i b i t o r s f r o m t h e D W D a n d P M L e s t i m a t e s . W e f e e l s u f f i c i e n t p o s t - t r e a t m e n t w i l l b e a c h i e v e d b y t h e c a l c i t e , c a r b o n d i o x i d e , a n d s o d i u m h y d r o x i d e s y s t e m s i n c l u d e d i n a l l t h r e e p r o j e c t s 2 2 S u e M c C l o u d 3 - 2 1 1 / 1 3 / 2 0 1 2 P a g e 3 - 2 s m a l l m a t t e r b u t t h e 4 6 a c r e p a r c e l i s a c c e s s e d b y a n e a s e m e n t f r o m t h e M o n t e r e y R e g i o n a l W a s t e M a n a p e m e n t D i s t r i c t . . N o t e d , w i l l a m e n d t h e d e s c r i p t i o n . 2 3 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 F a l l b a c k f o r C a l A m ' s s l a n t w e l l s w o u l d b e t h e R a n n e y w e l l b u t n o i n d i c a t i o n o f c o s t d i f f e r e n c e . T h e c o s t s a r e r o u g h l y c o m p a r a b l e — w i l l s o s t a t e . 2 4 S u e M c C l o u d N A 1 1 1 1 3 / 2 0 1 2 D W O i n t a k e p i p e c r o s s i n g H i w a y 1 - w h a t i s i n v o l v e d i n u s i n g e x i s t i n g t u n n e l a n d w a s t h i s t a k e n i n t o t i m e f a c t o r f o r n e c e s s a r y p e r m i s s i o n s Y e s , u s e o f t h e D y n e g y t u n n e l s i s s u b j e c t t o a p e n d i n g a g r e e m e n t b e t w e e n D V V D a n d D y n e g y . T h e c o s t s w o u l d b e b o r n e b y o t h e r e n t i t i e s o u t s i d e t h e d e s a l i n a t i o n f a c i l i t y . E v a l u a t e d c o s t s f o r D W D r e p r e s e n t t h e t o t a l c o s t o f t h e f a c i l i t y i n p r o d u c t i o n o f w a t e r . 2 5 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 D V V D r e f e r s t o p r o p r i e t a r y s y s t e m s o f M L P P - h o w w i l l c o s t s b e o b t a i n e d 2 6 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 W a s l a c k o f r e d u n d a n c y f o r p r o d u c t s t o r a g e f i g u r e d i n f o r s o m e s u i t a b l e t e m p o r a r y s t o r a g e ? A l l s i t e s h a v e s u f f i c i e n t s p a c e t o a c c o m m o d a t e t e m p o r a r y s t o r a g e t a n k s . N o a d d i t i o n a l c o s t s w e r e a s c r i b e d . 2 7 S u e M c C l o u d 3 - 8 N A 1 1 / 1 3 / 2 0 1 2 1 1 / 1 3 / 2 0 1 2 W h e n w i l l a d d i t i o n a l a n a l y s i s t o a s s e s s t h e v e r t i c a l m i x i n g z o n e a t t h e i n t e r f a c e o f t h e s u b m a r i n e c a n y o n b e c o m p l e t e d C o s t o f c o n s t r u c t i o n w i t h i n t h e f l o o d p l a i n S p r i n g 2 0 1 3 . T h e r e s u l t s o f t h e D W D i n t a k e s t u d i e s a r e a n t i c i p a t e d t o b e a v a i l a b l e U n k n o w n , b u t l i k e l y n o t s i g n i f i c a n t . T h e P M L s i t e i s a n a r e a o f t h e f l o o d p l a i n t h a t d o e s n o t r e q u i r e f l o o d i n s u r a n c e , s o t h e r i s k i s g a u g e d t o b e l o w . 2 8 S u e M c C l o u d 2 9 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 R e c o m m e n d a t i o n f o r p a r t i a l s e c o n d p a s s R O t r e a t m e n t s y s t e m - c o s t S e e m o r e d e t a i l e d r e s p o n s e a b o v e , b u t i t w a s i n s e r v i c e o f p r o v i d i n g a b a l a n c e d , a p p l e s t o a p p l e s c o s t e v a l u a t i o n f o r t h e p u r p o s e s o f t h i s r e p o r t . 3 0 S u e M c C l o u d 3 - 1 1 1 1 / 1 3 / 2 0 1 2 S e v e r a l u n k n o w n s r e l a t i v e t o t h e o u t f a l l - c o s t s a n d t i m e A g r e e d , t h o u g h w e f e e l - t h e $ 3 . 0 M c o s t p r o v i d e d b y P M L a s d e s c r i b e d a b o v e a l o n g w i t h t h e o v e r a l l 3 0 % c o n t i n g e n c y p r o v i d e s u f f i c i e n t c o n s e r v a t i s m a t t h i s s t a g e o f p r o j e c t d e v e l o p m e n t . 3 1 S u e M c C l o u d N A 1 1 / 1 3 / 2 0 1 2 W h a t i s p r o c e s s / c o s t o f r e t u r n i n g g r o u n d w a t e r t o t h e S a l i n a s B a s i n C o s t s a r e i n c l u d e d i n t h e e v a l u a t i o n ; a n d a p r i m a r y r e a s o n w h y C a l A m ' s p l a n t s i z e s a r e h i g h e r i n t h e e v a l u a t i o n t h a n P M L o r D V V D . T h e c o s t s i n c l u d e p u m p i n g , t r e a t m e n t a n d r e t u r n p u m p i n g a n d p i p i n g s y s t e m s t o t h e e x i s t i n g C S I P _ p o n d s . 3 2 S u e M c C l o u d 5 - 6 1 1 / 1 3 / 2 0 1 2 E c o n o m i c s - e v a l u a t e d - h o w a n d b y S P I ? P a g e 5 - 6 t o p o f p a g e y o u i n d e p e n d e n t l y a d j u s t c o s t s a n d d e v e l o p e d y o u r o w n e s t i m a t e s - h o p e s h a r e s y s t e m s w i t h s o m e o n e . C o s t e s t i m a t e s a r e p a r t o f t h e e n g i n e e r i n g s e r v i c e s w e p r o v i d e . A s d e s c r i b e d , w e p r i m a r i l y l o o k e d t o v a l i d a t e c o s t s p r o v i d e d b y t h e p r o p o n e n t s b y p r e p a r i n g o u r o w n c o m p a n i o n e s t i m a t e s . T h e p u r p o s e o f o u r e s t i m a t e s i s t o p r o v i d e a b a l a n c e d c o m p a r i s o n o f t h e t h r e e p r o j e c t s o n a n e q u i v a l e n t b a s i s . P a g e 4 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 148, Packet Page 174 M P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s D R A F T R E P O R T • • C o m m e n t B y , P a g e N o . D a t e o f C o m m e n t - C o m m e n t s ' R e s p o n s e / A c t i o n , 3 3 S u e M c C l o u d N A 1 1 / 1 8 / 2 0 1 2 I a l s o s t i l l s i t o n t h e b o a r d o f t h e M o n t e r e y R e g i o n a l W a s t e M a n a g e m e n t D i s t r i c t a n d h a v e r e c e n t l y s t e p p e d d o w n a s i t s V i c e C h a i r . I t i s i n t h a t c a p a c i t y t h a t I w a n t e d t o t a l k t o y o u . S p e c i f i c a l l y I w a n t e d t o k n o w w h a t f i g u r e a r e y o u u s i n g f o r e n e r g y c o s t ? A s y o u p e r h a p s k n o w , t h e D i s t r i c t i s p l a n n i n g f o r a $ 2 0 M p l u s n e w g e n e r a t o r t o I n c r e a s e t h e a m o u n t o f m e t h a n e g a s w e c o n v e r t i n t o e n e r g y . I t j u s t s o h a p p e n s t h a t o u r m o n t h l y b o a r d m e e t i n g w a s t h i s p a s t F r i d a y . A t t h i s m e e t i n g s t a f f p r e s e n t e d 3 y e a r s o f r e v e n u e i n f o r e t h e u t i l i z a t i o n o f l a n d f i l l g a s w h i c h c u r r e n t l y p r o d u c e s 5 m e g a w a t t s o f r e n e w a b l e e n e r g y ; t h u s s a v i n g t h e d i s t r i c t a b o u t $ 3 5 0 k i n d e f e r r e d p o w e r p u r c h a s e s a n d s e l l s t h e e x c e s s o n t h e g r i d . W e p r e s e n t l y h a v e 2 p o w e r s a l e s c o n t a c t s w i t h P G & E a n d 3 P h a s e s E n e r g y . V V i l l l i a m M e r r y i s t h e G M f o r t h e D i s t r i c t a n d a n e n g i n e e r . A s I u n d e r s t a n d i t y o u t w o h a v e n o t t a l k e d a n d I t h i n k p e r h a p s y o u s h o u l d t o c o m p a r e t h e c o s t o f D i s t r i c t e n e r g y ( w h i c h I w i l l s e n d o r h a v e s e n t t o b y e m a i l ) w i t h y o u r c o s t p r o j e c t i o n s . W e a r e i n t e r e s t e d i n m a k i n g t h i s a s g r e e n a p r o j e c t a s p o s s i b l e a n d I n k e e p i n g r e v e n u e s l o c a l . P r o p o n e n t s a r e i n c e n t i v i z e d t o p r o c u r e t h e l o w e s t c o s t o f e n e r g y f o r t h e i r p r o j e c t s . 3 4 D a l e H e k h u i s N A 1 1 / 1 3 / 2 0 1 2 F i r s t , t h e e s t i m a t e s f o r C a l - A m ' s c o s t o f d e s a l w a t e r . a p p e a r t o b e u n u s u a l l y l o w c o n s i d e r i n g t h a t C a l - A m ' s c a p i t a l c o s t s a r e $ 4 7 m i l l i o n h i g h e r t h a n t h o s e o f D e e p w a t e r . F u r t h e r , I c a n ' t f i n d p r o j e c t m a n a g e m e n t f e e s a n d C a l - A m ' s p r o f i t s f r o m t h e p r o j e c t i n t h e c o s t e s t i m a t e s . F o r i n f o r m a t i o n , C a l - A m ' s p r o j e c t m a n a g e m e n t f e e s a r e $ 2 5 . 9 m i l l i o n a n d D e e p w a t e r ' s a r e $ 1 7 . 9 m i l l i o n . D a v e S t o l d t t e l l s m e t h a t C a l A m ' s p r o f i t l e v e l w o u l d b e a p p r o x i m a t e l y $ 8 m i l l i o n d e c l i n i n g b y $ 2 5 0 , 0 0 0 e a c h y e a r d u e t o d e p r e c i a t i o n o f a s s e t s . F i n a l l y , t h e r e i s a n a s s u m p t i o n i n t h e [ S P I 1 a n a l y s i s t h a t w a r r a n t s c o m m e n t . T h a t a s s u m p t i o n i s t h a t C a l - A n -i s $ 9 9 m i l l i o n p r o p o s a l f o r z e r o - c o s t , a d v a n c e d f u n d i n g o f i t s p r o j e c t , c o u r t e s y o f P e n i n s u l a r a t e p a y e r s , w i l l b e o p e r a t i v e . T h i s i s s u r p r i s i n g . T h e p r o p o s a l i s y e t l o b e a p p r o v e d b y t h e C P U C a n d h a s m a n y d r a w b a c k s f o r r a t e p a y e r s . A t a m i n i m u m , $ 9 9 m i l l i o n i n p r o j e c t e q u i t y f o r r a t e p a y e r s i s m a n d a t o r y i f t h i s p r o p o s a l i s t o b e a c c e p t a b l e , C a l A m ' s c o s t o f c a p i t a l w i l l b e a m e n d e d i n t h e f i n a l r e p o r t t o r e f l e c t t h e i r h i g h e r c o s t o f f i n a n c i n g a n d o v e r a l l f i n a n c i a l m o d e l . T h i s w i l l b e a c c o m p l i s h e d b y u s i n g a h i g h e r , r e p r e s e n t a t i v e c a p i t a l r e c o v e r y f a c t o r f o r t h e i r p r o j e c t . W i t h r e g a r d t o t h e p r o p o s e d s u r c h a r g e , w e m a k e n o m e n t i o n o f i t i n t h e r e p o r t a s i t i s o u t s i d e t h e s c o p e o f o u r e v a l u a t i o n . A l l p r o p o n e n t s a r e g a u g e d t o h a v e s u f f i c i e n t c a p i t a l t o p u r s u e t h e i r p r o j e c t s g o i n g f o r w a r d — w e m a k e n o r e p r e s e n t a t i o n f u r t h e r t h a n t h a t . T h e s u r c h a r g e i s p a r t o f a n a c t i v e p r o c e s s a t t h e C P U C a n d t h a t i n f o r m a t i o n i s p u b l i c l y a v a i l a b l e . 3 5 D a l e H e k h u i s N A 1 1 / 1 3 / 2 0 1 2 S e c o n d , C a l - A m h a s r e c e n t l y a d v i s e d t h a t I t i s l o o k i n g a t a h o s t o f c o n t i n g e n c i e s f o r s l a n t w e l l s . T h e s e i n c l u d e : ( 1 ) S h a l l o w e r s l a n t w e l l s ; ( 2 ) H o r i z o n t a l R a n n e y w e l l s ; ( 3 ) O p e n o c e a n I n t a k e n e a r b y ; ( 4 ) S l a n t w e l l a t M o s s L a n d i n g ; ( 5 ) O p e n o c e a n i n t a k e a t M o s s l a n d i n g ; ( 6 ) L o c a t i n g t h e d e s a l P l a n t a t M o s s L a n d i n g . A t a m i n i m u m , t h e s e c o n t i n g e n c i e s g i v e r i s e t o u n c e r t a i n t y a n d r i s k a s t o t h e c o u r s e o f t h e C a l - A m p r o j e c t . Q u e s t i o n : D i d [ S P I ] s o r t t h r o u g h t h e p o t e n t i a l c o n s e q u e n c e s o f i n v o k i n g t h e s e c o n t i n g e n c i e s f o r t h e i r i m p a c t o n C a l - A m ' s i m p l e m e n t a t i o n s c h e d u l e ? O u r r e p o r t r e f l e c t s i n f o r m a t i o n a v a i l a b l e a s o f O c t o b e r 1 5 , 2 0 1 2 f o r t h e t h r e e p r o j e c t s . T h e C a l A m c o n t i n g e n c y p l a n s w e r e i n r e s p o n s e t o a n o r d e r f r o m t h e C P U C . W e c o n s i d e r t h e p o t e n t i a l f o r I m p l e m e n t a t i o n o f a n y o f t h e p l a n s o v e r l y s p e c u l a t i v e a t t h i s p o i n t . P a r t o f t h e r e a s o n f o r t h e r e c o m m e n d e d 3 0 % c o s t c o n t i n g e n c y i n c l u d e d i n o u r e v a l u a t i o n i s t o a c c o u n t f o r u n k n o w n s o f t h i s n a t u r e . 3 6 D a l e H e k h u i s N A 1 1 / 1 3 1 2 0 1 2 T h i r d , t h e e n v i r o n m e n t a l i n f o r m a t i o n t h a t w o u l d s u p p o r t c r o s s c o m p a r i s o n s o f t h e I n t a k e / o u t f a l l s y s t e m s w a s n ' t a v a i l a b l e t o [ S P I ] . T h i s i n f o r m a t i o n w i l l c o m e f r o m E I R s c u r r e n t l y u n d e r p r e p a r a t i o n . T h i s i s i m p o r t a n t b e c a u s e e n v i r o n m e n t a l i m p a c t i n f o r m a t i o n w i l l b e a b s o l u t e l y n e c e s a r y i n o r d e r t o e v a l u a t e ( 1 ) T h e i m p a c t o n s e a l i f e ; ( 2 ) T h e i m p a c t o n t h e s e a b e d p a r t i c u l a r l y f r o m b r i n e d i s p o s a l ; ( 3 ) T h e i m p a c t o n s e a w a t e r i n t r u s i o n . Q u e s t i o n 1 : W i l l t h e s e m a t t e r s f a l l b y t h e w a y s i d e b e c a u s e i t i s j u d g e d t h a t E I R c o m p l e t i o n t i m e s a r e t o o f a r i n t o t h e f u t u r e ? Q u e s t i o n 2 : W o u l d t h i s b e a c c e p t a b l e t o p e r m i t t i n g a u t h o r i t i e s ? _ T e x t h a s b e e n a d d e d t o t h e r e p o r t t o c l a r i f y t h e s e p o i n t s . D e t a i l e d a s s e s s m e n t s o f p o t e n t i a l i m p a c t s o f i n t a k e a n d d i s c h a r g e a r e c e n t r a l t o t h e e n v i r o n m e n t a l r e v i e w o f a l l p r o j e c t s . 3 7 D a l e H e k h u i s N A 1 1 / 2 1 / 2 0 1 2 T h e f i n a l S P I R e p o r t s h o u l d h a v e a l i s t i n g , a t t i r e b e g i n n i n g o f t h e r e p o r t , o f t h e k e y a s s u m p t i o n s u n d e r l y i n g t h e r e p o r t ' s a n a l y s i s . A n e x a m p l e o f a k e y a s s u m p t i o n m i g h t b e t h a t C a l - A m i s e l i g i b l e f o r p u b l i c f i n a n c i n g , A s s u m p t i o n s a r e p r i m a r i l y s c h e d u l e r e l a t e d a n d t h e s e a r e d e s c r i b e d a d e q u a t e l y i n t h e d i s c u s s i o n o f p r o p o n e n t s c h e d u l e s . C a l A r n ' s f i n a n c i n g m o d e l w i l l b e a d j U s t e d a s d e s c r i b e d a b o v e . 3 8 D a l e H e k h u i s N A 1 1 / 2 1 / 2 0 1 2 S P I s h o u l d p r e p a r e a m e m o , f o r i n c l u s i o n i n t h e r e p o r t , l i s t i n g a l l c o s t s t h a t d r o p p e d o u t o f t h e t h e c o s t a n a l y s i s b e c a u s e t h e y d i d n o t t i t a n a p p l e s t o a p p l e s c o m p a r i s o n f o r m a t . S i m p l y b e c a u s e c o s t s m a y n o t h a v e t i t t h e f o r m a t I s n o r e a s o n t o i g n o r e t h e m . A t a m i n i m u m , t h e r e p o r t r e a d e r n e e d s t o k n o w u p - f r o n t w h a t C a l - A m ' s p r o f i t s a r e . R a t e p a y e r s w i l l b e p a y i n g f o r t h e s e p r o f i t s . T h e e c o n o m i c e v a l u a t i o n i n t h e r e p o r t s e e k s t o p r e s e n t t o t a l c o s t s o f e a c h p r o j e c t f o r p r o d u c t i o n a n d s u p p l y o f p o t a b l e w a t e r f r o m a s e a w a t e r d e s a l i n a t i o n f a c i l i t y o n a n e q u i v a l e n t b a s i s . W e a g r e e t h a t C a l A m h a s a d i f f e r e n t c o s t o f c a p i t a l a n d w i l l a m e n d t h a t e v a l u a t i o n i n t h e f i n a l r e p o r t . 3 9 D a l e H e k h u i s N A 1 1 / 2 1 / 2 0 1 2 W i t h r e g a r d t o t h e $ 9 9 m i l l i o n o f a d v a n c e f u n d i n g , i t s h o u l d b e m a d e c l e a r t h a t i t i s o n l y a p r o p o s a l t h a t i s y e t l o b e v e t t e d b y t h e C P U C a n d t h e D I R A . T h e r e m a y b e c h a n g e s i n w h a t C a l - A m h a s a s k e d f o r i n t h e f i n a l v e r s i o n . I f e e l t h a t i t ' s i m p r o p e r t o u s e a p r o p o s a l , a n d t h a t ' s a l l t h a t a d v a n c e f u n d i n g i s , w i t h o u t m a k i n g i t c l e a r t o t h e r e a d e r t h a t i t i s a p r o p o s a l . T h e s p e c i f i c s o f f u n d i n g C a l A m ' s p r o j e c t a r e o u t s i d e t h e s c o p e o f o u r e v a l u a t i o n , 4 0 D a l e H e k h u i s N A 1 1 / 2 1 / 2 0 1 2 A s m y c o l l e a g u e D o u g W i l h e l m h a s r e c e n t l y s u g g e s t e d , a n e s t i m a t e o f t h e a d d i t i o n a l c o s t s t h a t c o u l d b e i n c u r r e d b y t h e s l i p p a g e o f t h e p r o j e c t c o m p l e t i o n s c h e d u l e s t h a t S P I h a s c o m e u p w i t h - a n y w h e r e f r o m 8 m o n t h s t o a y e a r b e y o n d t h e d e a d l i n e - i s i n o r d e r . J u s t h o w s e r i o u s I s t h e s l i p p a g e f r o m a c o s t s t a n d p o i n t ? T h a t i s w h a t S P I s h o u l d b e a s k e d t o c o m e u p w i t h , V V . I l d l i . d b b l y 1 1 . 1 1 d U l l i l l 1 1 1 1 1 p E l q . l . . I i i i i p w i l i e n t a t i u i l , U b l L U d l l L I f l C . p r o j e c t s i n o u r e v a l u a t i o n t o c o v e r p r o j e c t d e v e l o p m e n t p r i o r t o c o n s t r u c t i o n . W e f e e l t h i s e s t i m a t e , a l o n g w i t h t h e 3 0 % o v e r a l l p r o j e c t c o n t i n g e n c y , i s s u f f i c i e n t t o a c c o u n t f o r t y p i c a l d e l a y s i n p r o j e c t d e v e l o p m e n t f o r e c a s t a t t h i s t i m e . E v a l u a t i o n s b e y o n d t h a t a r e o u t s i d e t h e P a g e 5 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 149, Packet Page 175 M P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s D R A F T R E P O R T N o . - . . . . C o m m e n t B y , • P a g e . • N o . b .a t e . o f : C o m m e n t C o m m e n t s . . . . . . . . • . - ' R e s p o n s e / A c t i o n 4 1 R o n W e i t z m a n N A 1 1 / 9 / 2 0 1 2 W h y t h e c a p i t a l s t r u c t u r e o f 5 7 e q u i t y t o 4 3 d e b t w h e n t h e c u r r e n t c a p i t a l s t r u c t u r e i s 4 2 e q u i t y t o 5 8 d e b t ? T h e d i s c u s s i o n o f C a l A m ' s f i n a n c i n g s t r u c t u r e w i l l b e a m e n d e d i n t h e f i n a l i p o r t . T h e d i s c u s s i o n o f C a l A m ' s f i n a n c i n g s t r u c t u r e w i l l b e a m e n d e d i n t h e f i n a l r e p o r t . 4 2 R o n W e i t z m a n N A 1 1 / 9 / 2 0 1 2 W h y 5 % i n t e r e s t r a t e f o r C a l A m w h e n i t c u r r e n t l y c h a r g e s r a t e p a y e r s 6 . 4 8 % 7 4 3 R o n W e i t z m a n N A 1 1 / 9 / 2 0 1 2 W h y t h e i n t e r e s t r a t e o f 4 % t a r s p u b l i c a g e n c y w h e n i t c o u l d p r o b a b l y g e t 3 . 5 % o r l e s s , a n d i t i s a l o t m o r e l i k e l y t o h a v e a c c e s s t o s t a t e r e v o l v i n g - f u n d m o n e y a t 2 . 5 % t h a n C a l A m ? T h e d i s c u s s i o n o f C a l A m ' s f i n a n c i n g s t r u c t u r e w i l l b e a m e n d e d i n t h e f i n a l r e p o r t . 4 4 R o n W e i t z m a n N A 1 1 / 9 / 2 0 1 2 H o w d o e s t h e $ 2 0 7 m i l l i o n c o s t f o r C a l A m ' s 9 , 0 0 0 a c r e - f o o t p r o j e c t I n t h e t a b l e c o m p o r t w i t h t h e $ 3 6 5 m i l l i o n i n C a l A m ' s p r o p o s a l t o t h e C P U C ? T h e c o s t s p r o v i d e d t o t h e C P U C i n c l u d e a d d i t i o n a l , c o m m o n d i s t r i b u t i o n f a c i l i t i e s w i t h i n C a l A m ' s s y s t e m t h a t w e r e n o t i n c l u d e d i n t h e p r o j e c t — a s t h e y a p p l y e q u a l l y t o a l l t h r e e . F u r t h e r , t h e C P U C h a d C a l A m i n c l u d e a n a d d i t i o n a l c o n t i n g e n c y i n t h e i r c o s t e s t i m a t e t o a c h i e v e a " m a x i m u m c r e d i b l e c o s t " f o r p l a n n i n g p u r p o s e s . O u r e v a l u a t i o n c o n s i d e r e d a l l t h r e e p r o j e c t s w i t h a c o m m o n 3 0 p e r c e n t c o n t i n g e n c y a l o n e . 4 5 R o n W e i t z m a n N A 1 1 / 9 / 2 0 1 2 T h e t i m e l i n e i s w h a t t r o u b l e s m e m o s t . T h e S P I r e p o r t i s b a s e d o n d a t a a v a i l a b l e i n J u l y . S i n c e t h e n , C a l A m ' s p r o j e c t h a s b e e n d e l a y e d a t l e a s t a y e a r , a n d C a l A m m a y e v e n h a v e t o s t a r t a l l o v e r b e c a u s e o f t h e w a t e r r i g h t s i s s u e . T h e P a c i f i c G r o v e p r o j e c t i s l i k e l y t o b e g i n w o r k o n i t s S I R b e f o r e t h e e n d o f t h e y e a r , n o t y e a r s o f f , a n d s i n c e J u l y t h e p r o j e c t h a s c h a n g e d I t s s e a w a t e r i n t a k e p l a n s s o i t w i l l n o t r e q u i r e s p e c i a l p r e - p r o c e s s i n g o f t h e i n t a k e w a t e r . P M L p r o j e c t t i m e l i n e h a s b e e n c o r r e c t e d f r o m t h e o r i g i n a l r e p o r t . H o w e v e r , t h e t i m e l i n e f o r p r o j e c t d e s c r i p t i o n a n d E I R / E I S r e m a i n g e n e r i c b a s e d u p o n a s s u m e d n e e d f o r d e t a i l e d e v a l u a t i o n s o f p r o j e c t i n t a k e a n d d i s c h a r g e i m p a c t s . T e x t h a s b e e n a d d e d t o r e f l e c t p o t e n t i a l d e l a y s i n t h e C a l A m P r o j e c t d u e t o d e l a y s i n t h e t e s t w e l l p r o j e c t b u t t h e s e h a v e n o t b e e n f u l l y a n a l y z e d . D V V D h a s p r e s e n t e d a n u p d a t e d p r o p o n e n t ' s s c h e d u l e . 4 6 R o n W e i t z m a n N A 1 1 / 1 2 / 2 0 1 2 W h y d o e s t h e C a l A m t o t a l c a p i t a l c o s t f o r t h e 9 , 0 0 0 a c r e - f o o t p r o j e c t i n e a c h o f t h e t w o r e p o r t s d i f f e r s u b s t a n t i a l l y f r o m t h e $ 3 6 5 m i l l i o n i n C a l A m ' s c p u c p r o p o s a l ? ( L i k e w i s e , f o r t h e 5 , 5 0 0 ' p r o j e c t ) S e e r e s p o n s e a b o v e . 4 7 R o n W e i t z m a n N A 1 1 / 1 2 / 2 0 1 2 I n c o m p a r i n g " a p p l e s t o a p p l e s , " w h y d o e s t h e S P I c o n s u l t a n t l o a d t h e c o m p a r i s o n I n f a v o r o f t h e C a l A m p r o j e c t b y a d d i n g a s e c o n d p a s s - t h r o u g h R D t o t h e t w o n o n - C a l A m p r o j e c t s w h i l e u s i n g a 4 % i n t e r e s t r a t e f o r a l l p r o j e c t s ( T a b l e E S - 2 ) w h e n t h e r a t e i s m u c h l o w e r f o r e p u b l i c t h a n f o r a p r i v a t e p r o j e c t ? T h e e v a l u a t i o n o f a l l t h r e e p r o j e c t s o n a n e q u i v a l e n t R D t r e a t m e n t b a s i s d o e s n o t u n b a l a n c e i t ; r a t h e r i t b a l a n c e s i t i n e v a l u a t i n g a l l t h r e e p r o j e c t s o n a n e q u i v a l e n t b a s i s . T h e C a l A m f i n a n c i n g m o d e l w i l l b e a d j u s t e d i n t h e f i n a l r e p o r t . 4 8 R o n W e i t z m a n N A 1 1 / 1 2 / 2 0 1 2 W h y d o e s t h e S P 1 c o n s u l t a n t n o t c o n s i d e r t h a t t h e D e e p W a t e r p r o j e c t c a n n o t o w n o r o p e r a t e a d e s a l i n a t i o n p l a n t i n M o n t e r e y C o u n t y b e c a u s e i t h a s n o p u b l i c p a r t n e r ? D V V D p l a n s t o e s t a b l i s h a J P A c o m p o s e d o f p u b l i c a g e n c i e s t o o w n i t s p r o j e c t . W i l l c l a r i f y i n t h e f i n a l r e p o r t . 4 9 R o n W e i t z m a n N A 1 1 / 1 2 / 2 0 1 2 W h y d o e s t h e S P I c o n s u l t a n t n o t t a k e i n t o a c c o u n t t h e s t a t e A g e n c y A c t ' s p r o h i b i t i o n o f g r o u n d w a t e r ( n o t j u s t f r e s h w a t e r , b u t a n y g r o u n d w a t e r ) e x p o r t a t i o n f r o m t h e S a l i n a s V a l l e y G r o u n d w a t e r B a s i n , e x c e p t f o r F o r t O r d ? T h e s e l a s t t w o i t e m s a r e f a t a l f l a w s f o r t h e D e e p W a t e r a n d C a l A m p r o j e c t s . D V V D d o e s n o t t o o u r k n o w l e d g e e x t r a c t g r o u n d w a t e r a s p a r t o f i t s i n t a k e s y s t e m . F o r C a l A m , t h e i s s u e i s b e i n g v e t t e d t h r o u g h t h e C P U C p r o c e s s a n d i t ' s c o n s i d e r e d u n n e c e s s a r i l y s p e c u l a t i v e a t t h i s p o i n t t o p r e s u p p o s e a n o u t c o m e . A s a g e n e r a l r u l e , t h e C P U C a s a S t a t e a g e n c y h a s b r o a d a u t h o r i t y t o o v e r r u l e o t h e r a g e n c y o r d i n a n c e s i n t h e s e r v i c e o f e s t a b l i s h i n g a n e c e s s a r y p u b l i c w a t e r s u p p l y . 5 0 P a u l H a r t 5 - 4 1 1 / 1 4 / 2 0 1 2 ( i ) w o u l d l i k e t o s e e t h e c a p i t a l r e c o v e r y f o r C a l - A m i n T a b l e 5 - 2 r e f l e c t a h i g h e r c o s t o f c a p i t a l , s u c h a s 1 1 % A h i g h e r c o s t o f c a p i t a l f o r C a l A m w i l l b e i n c l u d e d i n t h e f i n a l r e p o r t . 5 1 P a u l H a r t N A 1 1 / 1 4 / 2 0 1 2 ( i i ) b e l i e v e s t h e r e a r e a d v a n t a g e s t o o w n e r s h i p i n t h a t f u t u r e l e a s e c o s t s a f t e r t h e t h i r t i e t h y e a r s h o u l d b e r e f l e c t e d I n o v e r a l l c o s t o f p r o j e c t s w h i c h a s s u m e l e a s e s , I n t h a t o w n e r s h i p c o s t s a r e f u l l y a m o r t i z e d o v e r t h i r t y y e a r s ; T h e c o s t e v a l u a t i o n i n t h e r e p o r t c o v e r s a 3 0 - y e a r t e r m . C o s t s b e y o n d t h a t a r e o u t s i d e t h e s c o p e o f t h i s e v a l u a t i o n . 5 2 P a u l H a r t 1 1 / 1 4 / 2 0 1 2 ( i i i ) I f C a l - A m n e e d s t o a s s e r t e m i n e n t d o m a i n t o g a i n s i t e c o n t r o l , w h a t w i l l b e t h e i m p a c t o n c o s t ? N o t s i g n i f i c a n t . C a t A m i s c u r r e n t l y o f f e r i n g a s s e s s e d c o s t s f o r t h e p r o p e r t y , w h i c h w o u l d l i k e w i s e b e t h e c o s t o f a n y e m i n e n t d o m a i n 5 3 P a u l H a r t 5 - 8 1 1 / 1 4 / 2 0 1 2 ( i v ) D i d n o t f e e l D W D t h i r d p a r t i n t a k e c o s t s w e r e a d e q u a t e l y r e f l e c t e d . T h e c o s t s w i l l b e b o r n u n d e r t h e p r o p o s e d p r o j e c t s t r u c t u r e b y a s e p a r a t e e n t i t y . T h a t f a c t i s I n t e g r a l t o D V V D ' s p r o p o s e d p r o j e c t . 5 4 P a u l H a r t N A 1 1 / 1 4 / 2 0 1 2 ( v ) W a n t s t o b e s u r e t h e a d d i t i o n a l c a p i t a l a n d o p e r a t i n g c o s t s r e l a t e d t o e x t r a c t i o n , t r e a t m e n t , a n d r e t u r n o f S a l i n a s V a l l e y g r o u n d w a t e r a r e f u l l y i n c l u d e d i n t h e c o s t s o f p o t a b l e w a t e r d e l i v e r e d . C o s t s a r e i n c l u d e d a s d e s c r i b e d a b o v e . 5 5 P a u l H a r t N A 1 1 / 1 4 / 2 0 1 2 ( v i ) W o u l d l i k e c l e a r e r e x p l a n a t i o n f o r t h e d i f f e r e n c e i n t i m e l i n e s — w h y i s t h e P M L s c h e d u l e e x t e n d e d f o r a d e t a i l e d p r o j e c t d e s c r i p t i o n , b u t n o t t h e o t h e r p r o j e c t s ? T h e t e x t i s r e v i s e d t o c l a r i f y t h i s p o i n t . P e r i o d f o r p r o j e c t d e s c r i p t i o n i n c l u d e s t i m e f o r e v a l u a t i o n o f i n t a k e a n d d i s c h a r g e i m p a c t s a s s o c i a t e d w i t h t h e P M L p r o j e c t . I n t h e c a s e o f D V V D a s c h e d u l e f o r t h e s e e v a l u a t i o n s h a s b e e n p r e s e n t e d . I n t h e c a s e o f C a l A m , t h e p r o j e c t r e l i e s u p o n p r i o r d e t e r m i n a t i o n s t h a t t h e p r o j e c t w o u l d h a v e n o s i g n i f i c a n t i m p a c t s f r o m i n t a k e o r b d n e d i s o s a l 5 6 P a u l H a r t N A 1 1 / 1 4 / 2 0 1 2 ( v i i ) I f D V V D i s a l a r g e r e g i o n a l p r o j e c t , w i t h l a r g e u p f r o n t f i x e d c o s t s , a n d t h e D V V D a n a l y s i s a s s i g n s o n l y a p e r c e n t a g e o f t h o s e c o s t s , w h o i s p a y i n g f o r t h e r e s t a n d w h a t a r e t h e r i s k s t h a t s u c h c o s t s a r e u l t i m a t e ! . a s s e d o n t o t h e P e n i n s u l a c u s t o m e r s ? T h e e x t e n t o f P h a s e 2 f a c i l i t i e s i n s t a l l e d d u r i n g P h a s e 1 i s l i m i t e d a n d a c c o u n t e d f o r i n o u r e v a l u a t i o n . P a g e 6 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 150, Packet Page 176 M P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s D R A F T R E P O R T . . • • C o r p m e n t ' B y P a g e . . .. N o , . , , D a t e . o f C o m m e n t m e . . . . . , . C o m m e n t s ' R e s p o n s e / A c t i o n . 5 7 N a d e r A g h a N A 1 1 / 1 4 / 2 0 1 2 E x p r e s s e d c o n c e r n t h a t S P I u s e d d a t a f r o m P M L ' s J u l y s u b m i t t a l , b u t s h o u l d h a v e u s e d t h e u p d a t e d O c t o b e r 2 0 1 2 s u b m i t t a l . O u r e v a l u a t i o n i n c l u d e d a l l i n f o r m a t i o n p r o v i d e d b y P M L u p t o O c t o b e r 1 5 , 2 0 1 2 . W e a r e n o t a w a r e o f a n y s p e c i f i c i n c o n s i s t e n c i e s w i t h i n f o r m a t i o n p r e s e n t e d i n t h e d r a f t r e p o r t . 5 8 N a d e r A g h a N A 1 1 / 1 4 / 2 0 1 2 A l s o e x p r e s s e d d i s a g r e e m e n t w i t h t h e r e p o r t s s c h e d u l e a n d b e l i e v e s t h e e n v i r o n m e n t a l d o c u m e n t p m L h a s p r o d u c e d , w h i c h h e r e f e r r e d t o e s a " f o c u s e d E I R " , w o u l d e x p e d i t e t h e s c h e d u l e , B o t h t h e P M L a n d D W D h a v e s u g g e s t e d a n E I R / E I S r e v i e w s c h e d u l e w h i c h i s p o t e n t i a l l y s h o r t e r t h a n t h e t i m e f r a m e p r e s e n t e d b y t h e C P U C . T h e r e p o r t c o n t i n u e s t o p r e s e n t a g e n e r i c s c h e d u l e w h i c h i s l o n g e r t h a n s u g g e s t e d b y t h e p r o j e c t p r o p o n e n t s . W e d o n o t s e e a d e q u a t e r a t i o n a l e t o s u g g e s t t h a t t h e E I R f o r P M L o r D V V D c a n b e c o m p l e t e d m o r e q u i c k l y t h a n t h e C a l A m p r o p o s a l . A l l c o s t s w e r e e v a l u a t e d o n a c o n s i s t e n t b a s i s a c r o s s a l l t h r e e p r o j e c t s . T h e p r i m a r y c o s t i n c r e a s e f o r P M L w a s t h a t a s s o c i a t e d w i t h a h i g h e r o v e r a l l p r o j e c t c o n t i n g e n c y , w h i c h w e c o n s i d e r w a r r a n t e d a t t h i s s t a g e o f d e v e l o p m e n t . 5 9 N a d e r A g h a N A 1 1 / 1 4 / 2 0 1 2 D i s a g r e e d w i t h t h e c o s t n u m b e r s d e v e l o p e d b y S P I a s i n c o n s i s t e n t w i t h t h e e s t i m a t e s P M L h a s a l r e a d y m a d e 6 0 G e o r g e R i l e y 5 - 6 , 5 - 7 1 1 / 1 2 / 2 0 1 2 I n t r y i n g t o u n d e r s t a n d a f e w c h a r t s , I r e p e a t e d t h e m a t h , b u t f o u n d e r r o r s . T h i s w i l l n o t r u i n y o u r d a y , b u t t h e r e a r e s i g n i f i c a n t m a t h e r r o r s o n t w o c h a r t s . ( f o r C a l A m a n d D W D , n o t P M L ) . B o t h t a l l i e s r e l a t e t o t h e s a m e i t e m s , b u t e r r o n e o u s l y . C h a r t 5 - 3 C A W , a n d c h a r t 5 - 5 D V V D . I n L i n e 8 , P l a n t F a c i l i t i e s ( P F ) S u b t o t a l A l l a r e w r o n g f o r C A W a n d D V V D . F o o t n o t e 2 r e f e r r e d t o e x c l u d i n g ' o f f s i t e t r e n c h e d p i p e l i n e s ' , w h i c h a r e I n t a k e / O u t f a l l a n d d i s t r i b u t i o n . D e d u c t i n g t h e n u m b e r s i n t h e c h a r t d o e s n o t g i v e y o u t h e s u b t o t a l s s h o w n , T h e s u b t o t a l s e e m s l i k e a n a t t e m p t t o i s o l a t e s o m e c o s t s f o r b e t t e r u n d e r s t a n d i n g , b u t t h e s e s u b t o t a l s a r e n o t u s e d a n y w h e r e e l s e i n t h e r e p o r t . A t l e a s t I c o u l d n o t f i n d a n o t h e r r e f e r e n c e . M a y b e t h e s e s u b t o t a l s h a v e b e e n u s e d i n f i n a n c i a l m o d e l s ( y o u r s ? ) , b u t t d o u b t i t . T h a t i s w h y I t h i n k i t w i l l n o t r u i n y o u r d a y , o r S P I e i t h e r . T h e I n t a k e / O u t f a l l c o s t c a t e g o r y i n t h e t a b l e i n c l u d e s f i x e d f a c i l i t i e s a s w e l l , i n c l u d i n g s t o r a g e t a n k s a n d p u m p s t a t i o n s . W e w i l l a m e n d t h e t a b l e t o b r e a k t h e c o s t s o u t s e p a r a t e l y s o t h a t c o s t s w i t h i n t h e t a b l e c a n b e c a l c u l a t e d f r o m t h e i n f o r m a t i o n s h o w n . 6 1 G e o r g e R i l e y N A 1 1 / 1 4 / 2 0 1 2 [ W a s ] t h e p e r i o d i c r e p l a c e m e n t o f t h e s l a n t w e l l s f a c t o r e d i n t o t h e c o s t a n a l y s i s f o r C a l A m ' s p r o p o s e d p r o j e c t ? N o , t h o u g h t h e i s s u e w i l l b e i n v e s t i g a t e d i n a s u p p l e m e n t a l e v a l u a t i o n f o l l o w i n g t h e f i n a l r e p o r t d u e i n J a n u a r y 2 0 1 3 . 6 2 G e o r g e R i l e y N A 1 1 / 1 4 / 2 0 1 2 W h a t i s t h e s t a t e o f o w n e r s h i p a t t h e e n d o f t h e 3 0 y e a r a n a l y s i s p e r i o d ( t e r m i n a l y e a r ) a n d c a n t h a t b e f a c t o r e d i n t o t h e a n a l y s i s ? ( s i n c e p r e s u m a b l y a l l o f t h e p l a n t s o p e r a t e f o r l o n g e r t h a n 3 0 y e a r s ) T h e c o s t e v a l u a t i o n i n c l u d e d a 3 0 - y e a r t e r m f o r t h e p u r p o s e s o f t h e r e p o r t . P r e s u m a b l y l e a s e p a y m e n t s f o r D V V D w o u l d c o n t i n u e p a s t t h a t t i m e . 6 3 G e o r g e R i l e y N A 1 1 / 1 4 / 2 0 1 2 ( i ) W h e r e i s e a c h p r o j e c t i n t e r m s o f s i t e c o n t r o l a n d d o e s i t i n t r o d u c e m o r e v a r i a b i l i t y t h a n r e f l e c t e d i n t h e r e p o r t ? S i t e a c q u i s i t i o n i s n o t c o n s i d e r e d a s i g n i f i c a n t b a r r i e r t o a n y o f t h e c a n d i d a t e p r o j e c t s . T h e C P U C h a s s o l i c i t e d I n p u t i n t h e s o a p i n g h e a r i n g s t o d e t e r m i n e i r a F e d e r a l E I S I s r e q u i r e d . D e p e n d i n g u p o n t h e a p p r o a c h t o c o m p l i a n c e , a n E I S c o u l d a d d 4 m o n t h s t o u p t o t w o y e a r s t o t h e s c h e d u l e . T e e t h e s b e e n r e v i s e d t o n o t e t h i s u n c e r t a i n 6 4 G e o r g e R i l e y N A 1 1 / 1 4 / 2 0 1 2 ( i i ) W i l l a n E I S ( f e d e r a l r e v i e w ) b e r e q u i r e d o f C a l - A m a n d w h a t e f f e c t w o u l d i t h a v e o n t h e C a l - A m s c h e d u l e ? 6 5 G e o r g e R i l e y N A 1 1 / 1 4 / 2 0 1 2 ( i i i ) T h e p r o p r i e t a r y i n t a k e i s a n u n k n o w n — w h e n w i l l m o r e i n f o r m a t i o n b e c o m e a v a i l a b l e a n d w h a t i m p a c t w i l l i t h a v e o n t h e a n a l y s i s ? T h e s e a w a t e r I n t a k e i s n o t p r o p r i e t a r y , b u t r a t h e r t h e w a r m i n g s y s t e m . I n f o r m a t i o n w i l l b e a v a i l a b l e o n c e a g r e e m e n t s h a v e b e e n f i n a l i z e d b e t w e e n D W D a n d D y n e g y , p r e s u m a b l y i n t h e n e x t t w o m o n t h s . Y e s , f o r t h e C a l A m p r o j e c t . 6 6 G e o r g e R i l e y N A 1 1 / 1 4 / 2 0 1 2 ( i v ) I s t h e a d d i t i o n a l c a p i t a l a n d o p e r a t i n g c o s t s r e l a t e d t o e x t r a c t i o n , t r e a t m e n t , a n d r e t u r n o f S a l i n a s V a l l e y g r o u n d w a t e r a r e f u l l y i n c l u d e d i n t h e c o s t s o f p o t a b l e w a t e r d e l i v e r e d ? 6 7 G e o r g e R i l e y N A 1 1 / 1 4 / 2 0 1 2 ( v ) i t a p p e a r s t h e r e a r e s e v e r a l i t e m s i n t h e C a l - A m s c h e d u l e b e i n g p e r f o r m e d s i m u l t a n e o u s l y — c a n m o r e t a s k s b e d o n e I n p a r a l l e l t o s h o r t e n t h e o t h e r p r o j e c t s ' s c h e d u l e s ? T h e P M L S c h e d u l e h a s b e e n r e v i s e d i n t h e t e x t . D V V D h a s s h o w n a p r o p o n e n r s p r o p o s e d s c h e d u l e w h i c h I s s u b s t a n t i a l l y s h o r t e r t h a n s h o w n i n t h e o r i g i n a l d r a f t . T h e T e x t c o m m e n t s o n t h i s c h a n g e 6 8 G e o r g e R i l e y N A 1 1 / 2 2 1 2 0 1 2 P r o f i t i n c l u d e d a s a c o s t : A p p l e s t o a p p l e s i s i n c o m p l e t e w i t h o u t s o m e c o m p o n e n t ( o r c o m m e n t ) a b o u t p r o f i t . C a l A m w i l l n o t u n d e r t a k e a p r o j e c t w i t h o u t a p r o f i t c o m p o n e n t . I a s k e d D V V D ( 2 p e o p l e ) i f t h e r e w a s p r o f i t b u i l t I n t o i t s n u m b e r s , a n d t h e a n s w e r s w e r e y e s . S P I e x p a n d e d t h o s e n u m b e r s , s o i f p r o f i t w a s a l r e a d y b u i l t i n , y o u e x p a n d e d p r o f i t a s w e l l , N o t a p p l e s t o a p p l e s . I a l s o a s k e d N a d e r A g h a i f p r o f i t w a s b u i l t i n t o P M L n u m b e r s . H e s a i d n o , s i n c e m o s t o f h i s a s s e t s a l e n u m b e r s w e r e b a s e d o n d e p r e c i a t e d o r d i s c o u n t e d v a l u e s , a n d h e d o e s n o t s e e k t o m a k e a p r o f i t o n t h e d e s a l p r o j e c t . S i n c e t h i s i s n o t e a s y f o r a p p l e s t o a p p l e s , I h a v e t h e s e q u e s t i o n s : a ) C a n y o u g e n e r a t e a n a p p l e s t o a p p l e s f o r a n e s t i m a t e d c a s t c o m p o n e n t f o r p r o f i t ? b ) I f p r o f i t i s b u i l t i n f o r D V V D , s h o u l d y o u e x c l u d e i t f r o m D V V D , o r a d d i t t o C a l A m ? c ) C o u l d y o u v e r i f y i f p r o f i t i s i n t h e P M L p r o j e c t a t a l l , a n d i f s o h o w , a n d i f y e s , h o w d o y o u p r e s e n t i t ? C a l A m ' s c o s t o f f i n a n c i n g w i l l b e a d j u s t e d t o i n c o r p o r a t e t h e i r c o s t s , i n c l u d i n g p r o f i t s . D V V D I n c l u d e d t h e i r p r o f i t i n t h e O & M c o s t c a t e g o r y l a b e l e d " O t h e r P r o p o n e n t E x p e n s e s " . T h e c o s t o f P M L ' s s i t e w a s i n c l u d e d a s $ 2 5 M f r o m t h e i r s u p p l i e d d o c u m e n t a t i o n . P a g e 7 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 151, Packet Page 177 M P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s D R A F T R E P O R T . , .. • P a g e N o . ' , D a t e o f ' ' C o h l r i l l e n t . : C o . . t h r m l P r i t s R e s P o n s e f A c t i o n 6 9 G e o r g e R i l e y N A 1 1 / 2 2 / 2 0 1 2 P r o f i t e x c l u d e d a s c o s t : I f p r o f i t i s n o t t o b e i n y o u r c o m p a r i s o n s , i t s h o u l d b e s p e c i f i c a l l y c o m m e n t e d o n a s n e e d i n g f u r t h e r e v a l u a t i o n . C a l A m w i l l u n d e r g o a d e e p r e v i e w b y D i v i s i o n o f R a t e p a y e r s A d v o c a t e s i n C P U C p r o c e d u r e s . T h e r e i s n o c o m p a r a b l e d e e p r e v i e w f o r D V V D o r P M L , u n l e s s i t o c c u r s b y l o c a l a g e n c i e s . S o p r o f i t h a s t w o t r a c k s f o r r e v i e w , a n d s h o u l d n o t b e t r e a t e d c a s u a l l y . I t w i l l b e a k n o w n c o m p o n e n t o f C a l A m c o s t s , a n d s o f a r i s r e l a t i v e l y u n k n o w n f o r D V V I D a n d P M L . W i l l y o u s u g g e s t a p r o c e d u r e f o r e v a l u a t i n g c o s t s f o r p r o f i t , o r a w a y t o a d d r e s s p r o f i t a n d p t h e r v a r i a b l e c o s t s t h a t S P I e x c l u d e s f r o m i t s r e p o r t ? S e e r e s p o n s e a b o v e . 7 0 G e o r g e R i l e y N A 1 1 / 2 2 1 2 0 1 2 S c h e d u l e q u e s t i o n # 1 . Y o u h a v e i n d i c a t e d y o u w i l l r e v i e w t h e s e a g a i n . I p o i n t o u t o n e i t e m — C a l A m h a s s e v e r a l p a r a l l e l t r a c k s i n i t s s c h e d u l e — E I R , C P C N a n d s l a n t w e l l t e s t i n g . T h e s e a r e e x p e c t e d t o m e r g e a t l a t e r d a t e s . O n t h e o t h e r h a n d , D V V D a n d P M L h a v e s e q u e n t i a l l i n e a r t r a c k s , w h e r e s i m i l a r s t e p s a r e n o t r u n i n p a r a l l e l . O f c o u r s e y o u r s c h e d u l e l a y o u t h a s m o r e t i m e f o r t h e t w o a t M L , a n d m u c h l e s s l i m e f o r C a l A m . Y o u r r e c o m m e n d e d t r a c k i s l i n e a r y e t y o u m a k e n o a c k n o w l e d g e m e n t o f t h e h i g h e r r i s k o f C a l A m ' s s e q u e n t i a l t r a c k s , i . e . , t h e p o t e n t i a l f o r l i t i g a t i o n f o r p r o c e d u r a l g r o u n d s . P o t e n t i a l l i t i g a t i o n b a s e d o n i n a d e q u a t e t i m e o r c o n s i d e r a t i o n o f r e l a t e d m a t t e r s w i l l b e a s i g n i f i c a n t r i s k . Y o u s h o u l d f u l l y a c k n o w l e d g e t h e s e d i f f e r e n c e s , u n l e s s y o u i n t e n d t o c o r r e c t f o r t h e m . C a l i v n h a s p r e s e n t e d a r e v i s e d s c h e d u l e f o r t h e p r o j e c t . T h i s h a s n o t b e e n f u l l y a n a l y z e d b u t t e x t h a s b e e n a d d e d t o n o t e t h e s c h e d u l e r i s k s a s s o c i a t e d w i t h d e l a y o f t h e t e s t w e l l s . D V V D h a s p r e s e n t e d a p r o p o n e n t ' s s c h e d u l e w h i c h s u b s t a n t i a l l y s h o r t e n s t h e p r o j e c t s c h e d u l e a n d t h i s i s c o m m e n t e d u p o n . P M L s c h e d u l e h a s b e e n c o r r e c t e d 7 1 G e o r g e R i l e y N A 1 1 / 2 2 1 2 0 1 2 S c h e d u l e q u e s t i o n # 2 . S e c t i o n 6 . 3 . 1 o n P M L , S P I r e f e r s t o a n e x i s t i n g N P D E S p e r m i t a n d a f i n d i n g b y R W Q C B t h a t " u s e o f u p t o 6 0 M G D o f s e a w a t e r t h r o u g h t h e e x i s t i n g i n t a k e s t r u c t u r e i n M o s s L a n d i n g H a r b o r w o u l d h a v e n e g l i g i b l e p o t e n t i a l i m p i n g e m e n t a n d e n t r a i n m e n t i m p a c t s . " S P I o b s e r v e s t h e s e f a c t s , y e t c o n c l u d e s t h a t P M L s c h e d u l e w i l l r e q u i r e d e e p e r a n a l y s i s ( a n d d e l a y ) b e c a u s e o f s p e c u l a t i v e c o m p a r i s o n s t o a " n o - p r o j e c t a l t e r n a t i v e " . F u r t h e r m o r e P M L h a s a n a l t e r n a t i v e i n t a k e o p t i o n u s i n g i t s l a r g e 5 4 t o 6 0 " d i s c h a r g e p i p e f o r i n s e r t i n g a n e w i n t a k e p i p e . C a n S P I r e c o n s i d e r i t s c o n c l u s i o n s o n t h e P M L s c h e d u l e w i t h a g r e a t e r r e l i a n c e o n t h e f a c t s ? T h e r e p o r t d u l y n o t e s t h a t i t i s p o s s i b l e t h a t P M L c a n c e r t i f y a n E I R w i t h o u t a n a l y s i s o f t h e e f f e c t s o f o p e r a t i o n o f t h e i n t a k e w i t h o u t d e t a i l e d a d e t a i l e d a n a l •y e v a l u a t i o n s o f t h e e f f e c t u p o n t h e m a r i n e e n v i r o n m e n t . T h e s c h e d u l e i n t h e r e p o r t h a s n o t b e e n r e v i s e d . B a s e d u p o n e x p e r i e n c e w i t h o t h e r o c e a n d e s a l i n a t i o n p r o p o s a l s i n C a l i f o r n i a , i t i s p r e s u m e d t h a t s u b s t a n t i a l e v a l u a t i o n s o f t h i s p o t e n t i a l i m p a c t w o u l d u l t i m a t e l y b e r e q u i r e d . 7 2 G e o r g e R i l e y N A 1 1 / 2 2 / 2 0 1 2 C o m p a r i n g " e x i s t i n g i n f r a s t r u c t u r e a n d e n t i t l e m e n t ( P M L ) t o ' ' d e s i g n a n d b u i l d " ( C a l A m a n d D W D ) . S P I h a s m a d e n o a n a l y s i s o f t h e d i f f e r e n t s c h e d u l e i m p a c t s b e t w e e n t w o p r o j e c t s ( C a l A m a n d D W D ) t h a t h a v e n o o r l i m i t e d s i t e c o n t r o l , n o p e r m i t h i s t o r y f o r i n t a k e a n d / o r d i s c h a r g e , a n d n o e n t i t l e m e n t s f o r t h o s e p e r m i t s . W h e r e a s P M L h a s a l l o f t h e a b o v e , w h i c h c o u l d b e p o s i t i v e e l e m e n t s f o r e x p e d i t i n g t h e s c h e d u l e C a n S P I c o m m e n t o n t h i s ? S i t e c o n t r o l i s a n a d v a n t a g e t o P M L a n d t h e t e x t h a s b e e n r e v i s e d o n t h e o t h e r p r o j e c t s t o n o t e t h e r i s k s a s s o c i a t e d w i t h t h i s i s s u e . P e r m i t h i s t o r y h a s n o t b e e n c o n s i d e r e d a f a c t o r . T h e p o t e n t i a l e n t i t l e m e n t o f p r i o r p e r mr Y i l s i s n o t e d i n t h e o r i g i n a l t e x t a n d h a s n o t b e e n r e v i s e d . 7 3 J o h n N a r i g i N A 1 1 / 1 4 / 2 0 1 2 ( i ) S l a n t w e l l s a p p e a r t o b e a l a r g e c o s t c o m p o n e n t — i s i t w o r t h i t r e l a t i v e t o t h e u s e o f R a n n e y w e l l s ? T h e c o s t s a r e c o m p a r a b l e . 7 4 J o h n N a r i g i N A 1 1 / 1 4 / 2 0 1 2 ( i i ) W h a t w o u l d b e t h e d i f f e r e n c e i n c o s t ? N o t s i g n i f i c a n t ; p o t e n t i a l l y s l i g h t l y l e s s f o r t h e R a n n e y a l t e r n a t i v e d u e t o r e d u c e d c o n n e c t i n g p i p i n g r e q u i r e m e n t s . 7 5 J o h n N a r i g i N A 1 1 / 1 4 / 2 0 1 2 ( i i i ) W h e r e i s e a c h p r o j e c t i n t h e s c h e d u l e r i g h t n o w ? A s p r e s e n t e d , b e g i n n i n g i n O c t o b e r 2 0 1 2 . 7 6 J o h n N a r i g i N A 1 1 / 1 4 / 2 0 1 2 ( i v ) I s t h e o p e r a t i n g a s s u m p t i o n o f r u n n i n g t h e C a l - A m f a c i l i t y a t 9 8 % c a p a c i t y r e a l i s t i c o r s e n s i b l e — s h o u l d c a p a c i t y b e l a r g e r ? W e c o n s i d e r i t r e a s o n a b l e b a s e d o n t h e l e v e l o f e q u i p m e n t r e d u n d a n c y p r o p o s e d . A t b a s e h o w e v e r , o u r e v a l u a t i o n d i d n o t c o n s i d e r p l a n t s i z i n g ; r a t h e r w e s o u g h t t o u s e c o n s i s t e n t s i z i n g / r e d u n d a n c y c r i t e r i a a c r o s s t h e t h r e e p r o j e c t s t o p r o v i d e a b a l a n c e d c o s t e v a l u a t i o n . U l t i m a t e l y , p l a n t c a p a c i t y i s a n i s s u e f o r t h e C P U C a n d p r o j e c t p r o p o n e n t s . 7 7 J o h n N a r i g i N A 1 1 / 1 4 / 2 0 1 2 ( v ) W h a t i s t h e s c h e d u l e f o r s l a n t w e l l t e s t i n g a n d C o a s t a l C o m m i s s i o n a p p r o v a l , a n d d o e s t h e C a l - A m s c h e d u l e a d e q u a t e l y r e f l e c t i t ? T h e s c h e d u l e w i l l b e u p d a t e d t o r e f l e c t t h e n e w d a t e , c u r r e n t l y f o r e c a s t a s N o v . 2 0 1 3 , i n a s u p p l e m e n t a l r e p o r t d u e i n J a n u a r y 2 0 1 3 . 7 8 J o h n N a r i g i N A 1 1 / 1 4 / 2 0 1 2 ( v i ) W h a t I m p a c t w i l l t h e g r o u n d w a t e r r e p l e n i s h m e n t C E Q A d e l a y h a v e o n t h e o v e r a l l C a l - A m C P U C a p p l i c a t i o n a n d s c h e d u l e ? T h e p r o j e c t E R f o r C a l A m i s p r e s u m e d t o c o v e r t h e l a r g e r s i z e p r o j e c t t h a t d o e s n o t d e p e n d u p o n g r o u n d w a t e r r e p l e n i s h m e n t p r o j e c t m o v i n g f o r w a r d . T h i s c o n s i d e r a t i o n o f m a x i m u m p o t e n t i a l i m p a c t s i s a p p r o p r i a t e a n d s h o u l d p r e v e n t s u b s t a n t i a l d e l a y s f r o m o c c u r r i n g s h o u l d t h e g r o u n d w a t e r r e p l e n i s h m e n t p r o j e c t b e a b o r t e d o r d e l a y e d . 7 9 J o h n N a r i g i N A 1 1 / 1 4 / 2 0 1 2 ( v i i ) W h a t w o u l d t h e t w o M o s s L a n d i n g p r o j e c t s c h a r g e C a l - A m a s t h e w h o l e s a l e c o s t o f w a t e r — h o w i s t h a t t o b e d e t e r m i n e d ? T h e s t r u c t u r e o f a f u t u r e w a t e r s u p p l y a g r e e m e n t a m o n g t h e p a r t i e s i s o u t s i d e t h e s c o p e o f o u r e v a l u a t i o n . 8 0 J o h n N a r i g i N A 1 1 / 1 4 / 2 0 1 2 ( v i i i ) W h a t a r e t h e c o s t a n d s c h e d u l e i s s u e s , i f P M L i n f r a s t r u c t u r e I s d e t e r m i n e d t o b e i n w o r s e c o n d i t i o n t h a n d e s c r i b e d ? T h e m a j o r s c h e d u l e d r i v e r s r e l a t e t o e n v i r o n m e n t a l a n d p e r m i t t i n g i s s u e s . P r e s u m a b l y a m o r e d e t a i l e d a s s e s s m e n t o f c u r r e n t i n f r a s t r u c t u r e c o n d i t i o n w o u l d b e u n d e r t a k e n a s p a r t o f t h e p r e d e s i g n p r o c e s s . T h e r e I s s u f f i c i e n t t i m e w i t h i n t h e p r o p o s e d c o n s t r u c t i o n s c h e d u l e t o a c c o m m o d a t e r e h a b i l i t a t i o n o f f a c i l i t i e s a s n e e d e d . P a g e 8 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 152, Packet Page 178 M P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s D R A F T R E P O R T N o . C o m M e n t * •• - - .. - . . , • ' ' P a g e N o : D a t e o f , C o m m e n t • C o m m e n t s R e s p o n s e / A c t i o n 8 1 R i c k R i e d e l N A 1 1 / 1 4 / 2 0 1 2 ( i ) t h e w a t e r q u a l i t y o f e a c h p r o p o s e d p r o j e c t a p p e a r s t o v a r y , a s d e s c r i b e d i n c h a p t e r 4 — i s t h e r e a c o m m o n s t a n d a r d , a n d d o e s t h e f i n a n c i a l a n a l y s i s b r i n g t h e m t o t h e c o m m o n s t a n d a r d ? T h e I n f o r m a t i o n p r o v i d e d i n C h a p t e r 4 s u m m a r i z e s t h e q u a l i t y p r o d u c e d b y t h e p r o p o n e n t s p r o p o s e d s y s t e m s . I n o u r c o s t e v a l u a t i o n , w e a s s u m e d e a c h t r e a t m e n t f a c i l i t y w o u l d p r o d u c e a c o n s i s t e n t q i i a l i t y o f w a t e r , a n d a m e n d e d p r o p o n e n t c o s t s a c c o r d i n g l y . 8 2 R i c k R i e d e l N A 1 1 / 1 4 / 2 0 1 2 ( i i ) W e s h o u l d b e r e m i n d e d t h a t t h e " f a t a l f l a w " s e c t i o n s a r e t e c h n i c a l i n n a t u r e , n o t l e g a l a n d / o r p o l i t i c a l , w h i c h d o p o s e s i g n i f i c a n t r i s k A g r e e d , w i l l u p d a t e t e x t , 8 3 R i c k R i e d e l N A 1 1 / 1 4 / 2 0 1 2 ( i i i ) D o e s t h e a n a l y s i s a d e q u a t e l y a d d r e s s w h e t h e r s u f f i c i e n t d i s p e r s i o n o f b r i n e d i s c h a r g e c a n b e a c h i e v e d , a n d I f n o t , w h a t i s t h e i n c r e m e n t a l c o s t t o d o s o ? B r i n e d i s p e r s i o n w a s n o t i n c l u d e d i n t h e e v a l u a t i o n , b e y o n d a r e v i e w o f t h e T r u s s e l l T e c h n o l o g i e s I n c . i n v e s t i g a t i o n w h i c h w e f o u n d c r e d i b l e a t t h i s s t a g e . P r e s u m a b l e t h e i s s u e w i l l b e I n v e s t i g a t e d f u r t h e r a s t h e p r o j e c t p r e d e s i g n a n d p e r m i t t i n g p r o c e s s e s a d v a n c e . W e d o n o t c o n s i d e r i t a l a r g e t e c h n i c a l c o n c e r n . 8 4 R i c k R i e d e l N A 1 1 / 1 4 / 2 0 1 2 C h a n g e s t a t e m e n t s t o " . . . n o [ t e c h n i c a l ] f a t a l f l a w s w e r e f o u n d . . . A g r e e d . 8 5 R i c k R i e d e l N A 1 1 1 1 4 / 2 0 1 2 A d d " L e g a l a n d f i n a n c i a l c o n s i d e r a t i o n s , s u c h a s w a t e r r i g h t s a n d p a y m e n t s c h e d u l e s ( s u c h a s S u r c h a r g e 2 b y C a l A m ) , w e r e n o t e v a l u a t e d . " Y o u m a y w a n t t o e l a b o r a t e o n w h y i t i s i n a p p r o p r i a t e t o c o n s i d e r p o t e n t i a l c o s t a s s o c i a t e d w i t h f i n a n c i n g t h e p r o j e c t i n t h i s t y p e o f r e p o r t . A l s o , y o u m a y w a n t t o p r o v i d e c a v e a t s f o r t h e a c c u r a c y o f t h e e s t i m a t e d c o s t s a n d t h a t t h e c o s t a n a l y s e s g i v e n a r e f o r e v a l u a t i n g t h e f e a s i b i l i t y o f t h e a l t e r n a t i v e s a n d a r e n o t i n t e n d e d t o r e f l e c t p o t e n t i a l a c t u a l c o s t s . A g r e e d . 8 6 R i c k R i e d e l N A 1 1 / 1 4 / 2 0 1 2 H o w w e r e t h e f i n i s h e d w a t e r q u a l i t y v a l u e s d e r i v e d s h o w n i n t h e t a b l e s i n S e c t i o n 4 ? T h e y w e r e e x t r a c t e d f r o m i n f o r m a t i o n p r o v i d e d b y t h e p r o p o n e n t s . 8 7 R i c k R i e d e l N A 1 1 / 1 4 / 2 0 1 2 D o t h e d i f f e r i n g f i n i s h e d w a t e r q u a l i t y v a l u e s i n S e c t i o n 4 a f f e c t t h e c o s t c o m p a r i s o n s g i v e n i n S e c t i o n 5 ? I f s o , i s i t p o s s i b l e t h a t t h e c o s t a n a l y s e s b e r e v i s e d s o t h a t e v e r y a l t e r n a t i v e s t r e a t m e n t s c h e m e i s m o d i f i e d ( e . g . n o t r e q u i r e 4 0 % s e c o n d p a s s ) s o a s t o p r o v i d e t h e s a m e f i n i s h e d w a t e r q u a l i t y ? T h e c o s t e v a l u a t i o n w e p r e p a r e d d i d a s s u m e a c o n s i s t e n t p r o d u c t w a t e r q u a l i t y ; a n d p r o p o n e n t c o s t s w e r e a d j u s t e d t o i n c l u d e t h e r e q u i r e d t r e a t m e n t p r o c e s s e q u i p m e n t . 8 8 R i c k R i e d e l N A 1 1 / 2 1 1 2 0 1 2 T w o o f t h e p o t e n t i a l d e s a l p r o j e c t s , D V V D a n d P M L , a r e p r o p o s i n g t o u s e o p e n o c e a n i n t a k e w i t h o u t c o n s i d e r i n g a n y a l t e r n a t i v e s t o o p e n o c e a n i n t a k e . M y u n d e r s t a n d i n g i s t h e C o a s t a l C o m m i s s i o n w o u l d c o n s i d e r o p e n o c e a n i n t a k e i n t h e e v e n t t h a t i t I s s h o w n t o b e t h e " l e a s t e n v i r o n m e n t a l l y h a r m f u l f e a s i b l e a l t e r n a t i v e . " T h a t i s , t h e C o a s t a l C o m m i s s i o n s P o l i c y i s t o n o t a l l o w a n o p e n o c e a n i n t a k e u n l e s s i t i s d e m o n s t r a t e d t h a t o t h e r a l t e r n a t i v e s a r e u n f e a s i b l e , T o m y k n o w l e d g e , n o w o r k h a s b e e n p e r f o r m e d t o d a t e b y e i t h e r D W D o r t h e P M L t o d e m o n s t r a t e t h i s , M i n i m a l t e x t h a s b e e n a d d e d t o S e c t i o n 6 o f t h e r e p o r t t o d i s c u s s C o a s t a l C o m m i s s i o n a n d N O A A p o l i c i e s . H o w e v e r , t i m e a n d b u d g e t c o n s t r a i n t s d o n o t a l l o w a t h o r o u g h e v a l u a t i o n o f t h e s e c o m m e n t s . T h e r e p o r t n o t e s t h a t t h i s s h o u l d b e a f o c u s o f f u t u r e a n a l y s e s . I t i s d e s i r a b l e t h o u g h u n c e r t a i n t h a t t h e C P U C E I R a n d p r o p o n e n t s ' E I R ' s w o u l d o f f e r a c o m p a r i s o n o f o p e n i n t a k e a n d s u b s u r f a c e i n t a k e s f o r c o m p a r i s o n . T h e J P A h a s m a d e t h o u g h t f u l c o m m e n t s i n t h e s o a p i n g h e a r i n g s w h i c h w o u l d i m p r o v e t h e E n e r g y c o s t s w i l l b e a d j u s t e d t o a c c o u n t f o r d i f f e r e n c e s i n p u m p i n g r e q u i r e m e n t s a m o n g t h e t h r e e p r o p o n e n t p r o j e c t s . C o a g u l a n t c a n b e u s e d s u c c e s s f u l l y w i t h M F / U F . T h e o v e r a l l P M L p r e t r e a t m e n t d e s i g n w a s m a i n t a i n e d a s p r o p o s e d w i t h t h e u n d e r s t a n d i n g t h a t a p l a n n e d o n e y e a r p i l o t p r o g r a m w o u l d b e u s e d t o f i n a l i z e t h e p r o c e s s c l e g n . i n f o r m a t i o n o n t h e e x i s t i n g e q u i p m e n t w a s n o t p r o v i d e d . I n g e n e r a l , t h e c o n t i n g e n c y a l l o w a n c e a n d p r g p o s e d r e h a b i l i t a t i o n a l l o w a n c e s p r o v i d e d b y P M L s h o u l d b e a d e q u a t e t o c o v e r p o t e n t i a l r e w o r k . C a l A m h a s a h i g h p u m p i n g c o s t a s s o c i a t e d w i t h i t s s u p p l y w e l l s a l o n g w i t h a h i g h e r c o s t o f e l e c t r i c i t y ; w h i l e D V V D h a d a n a r t i f i c i a l l y h i g h c o s t a s s o c i a t e d w i t h i t s p r o p o n e n t e x p e n s e c a t e g o r y a s d e s c r i b e d a b o v e . T h e c o s t s w i l l b e a d j u s t e d i n t h e f i n a l r e p o r t . 8 9 R i c k R i e d e l N A 3 - 1 1 1 1 / 2 1 / 2 0 1 2 1 1 / 2 1 / 2 0 1 2 S h o u l d D V V D b e g i v e n c r e d i t ( i . e . e i t h e r a g r e a t e r R O f l u x o r l e s s e r e n e r g y u s a g e ) t o a c c o u n t f o r t h e p r e h e a t ? P a g e 3 - 1 1 s t a t e s t h a t P M L w i l l p r e t r e a t w i t h c o a g u l a n t a n d U F . I s i t c o s t e f f e c t i v e t o r e m o v e c o a g u l a n t w i t h U F ? I s i t n e c e s s a r y t o a d d f l o c c u l a t i o n p r i o r t o f i l t r a t i o n ? 9 0 R i c k R i e d e l 9 1 , - R i c k R i e d e l N A 1 1 / 2 1 1 2 0 1 2 T h e e x i s t i n g i n f r a s t r u c t u r e a t P M L m a y b e a l i a b i l i t y , i n s t e a d o f a n a s s e t . F o r e x a m p l e , I b e l i e v e t h a t C a l i f o r n i a D e p t o f H e a l t h r e q u i r e s a l l p u m p s f o r w a t e r s y s t e m s t o b e l e a d f r e e . M o s t o l d e r p u m p s c o n t a i n s o m e l e a d a s a n a l l o y i n g e l e m e n t . D o t h e e x i s t i n g P M L p u m p s c o n t a i n l e a d ? A n o t h e r e x a m p l e , m a n y o l d e r s t o r a g e t a n k s c o n t a i n e d P C B s i n t h e c a u l k i n g . D o a n y o f t h e P M L t a n k s c o n t a i n P C B s a t a l e v e l t h a t m a y b e o f c o n c e r n ? 9 2 R i c k R i e d e l N A 1 1 1 2 1 / 2 0 1 2 T h e l o w e r O & M c o s t s f o r P M L I s c o u n t e r i n t u i t i v e c o n s i d e r i n g t h e f e e d w a t e r f r o m t h e h a r b o r i s p o t e n t i a l l y b o t h h i g h l y v a r i a b l e a n d c o n t a i n s m o r e o r g a n i c s t h a n t h e o t h e r a l t e r n a t i v e s . T h a t i s , O & M c o s t s f o r ' M L a r e e s t i m a t e d t o b e l o w e r t h a n t h e o t h e r 2 a l t e r n a t i v e s . I w o u l d e x p e c t P M L ' s O & M c o s t s t o b e g r e a t e r 9 3 M a y o r B u r n e t t E S - 9 1 1 / 1 3 / 2 0 1 2 " 1 0 , 7 3 0 A F Y i n a c c e s s o f i t s v a l i d r i g h t o f 3 , 3 7 6 A F Y . " S h o u l d b e i n e x c e s s o f . . . " N o t e d , w i l l c o r r e c t 9 4 M a y o r B u r n e t t 4 - 4 1 1 / 1 3 / 2 0 1 2 " I n g e n e r a l , D V V D p r o p o s e s t o p r o v i d e a p r o d u c t s u p p l y t h a t i s c o m p l i a n t w i t h a l l a p p l i c a b l e d r i n k i n g w a t e r r e g u l a t i o n s , i s n o n - a g g r e s s i v e . . . " S h o u l d t h i s b e " n o n - c o r r o s i v e ? W e c o n s i d e r t h e t e r m s s y n o n y m o u s b u t w i l l c h a n g e t o n o n - c o r r o s i v e . C h a p t e r 4 p r e s e n t s t h e p r o p o n e n t p r o p o s e d s y s t e m d e s i g n s ; a l o n g w i t h o u r p r o p o s e d a d j u s t m e n t s t o t h e i r r e s p e c t i v e f a c i l i t y c a p a c i t i e s . 9 5 M a y o r B u r n e t t 4 - 5 1 1 / 1 4 / 2 0 1 2 D W D a n d P M L a p p e a r t o u n d e r p r o d u c e i n t h e 5 , 5 0 0 A F Y s c e n a r i o a s s h o w n , f o r e x a m p l e , o n p a g e 4 - 5 ? 9 6 M a y o r B u r n e t t N A 5 - 7 / 5 - 8 1 1 / 1 4 / 2 0 1 2 1 1 / 1 4 / 2 0 1 2 I t w o u l d u s e f u l t o i d e n t i f y t h e k e y v a r i a b l e s t h a t a f f e c t c o s t a n d s c h e d u l e a n d r e q u e s t S P I d o a s e n s i t i v i t y a n a l y s i s o n t h o s e , F o r e x a m p l e , t h e y a l r e a d y h a v e d o n e s e n s i t i v i t y a n a l y s i s o n t h e c o s t o f e l e c t r i c i t y a t l e a s t f o r C a l - A m ' s p r o j e c t . D e t e r m i n e h o w s e n s i t i v e t h e c o s t e f f e c t i v e n e s s o f D V V D i s t o t h e a s s u m p t i o n t h a t t h e y w i l l b e a b l e t o b u i l d a 2 5 , 0 0 0 A F Y p l a n t . I f t h a t d o e s n o t c o m e t o p a s s a n d t h e c a p i t a l c o s t s o f p i p e s , e t c w i l l n e e d t o b e s p r e a d a c r o s s a s m a l l e r v o l u m e o f w a t e r , h o w m u c h m o r e e x p e n s i v e i s t h a t w a t e r p e r a c r e f o o t ? A d d i t i o n a l s e n s i t i v i t y a n a l y s e s r e l a t e d t o c o s t o f e n e r g y a n d s l a n t w e l l r e p l a c e m e n t w i l l b e i n c l u d e d i n a f u t u r e s u p p l e m e n t t o t h e f i n a l r e p o r t . T h e e c o n o m i c s w o u l d n o t c h a n g e m u c h a s t h e m a j o r s h a r e d c o s t c o m p o n e n t i s t h e p l a n n e d i n t a k e p i p e l i n e w h i c h i s n o t p a r t o f t h e i r c o s t s . M o s t f a c i l i t i e s w o u l d b e b u i l t f o r t h e r e q u i r e d p l a n l c a p a c i t y i n c r e m e n t i n P h a s e 1 a n d i n c l u d e t h o s e c o s t s a l o n e . 9 7 M a y o r B u r n e l l P a g e 9 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 153, Packet Page 179 M P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s D R A F T R E P O R T N o . , . . C o m m e n t B y ' : P a g e , N o . D a t e o f C o m m e n t C o m m e n t s . . R e s p e n s e l A c t i o n 9 8 M a y o r B u r n e t t N A 1 1 / 1 4 / 2 0 1 2 W h a t h a p p e n s t o P M L a n d D V V D i f M L P P i s s h u t d o w n o r o n c e - t h r o u g h c o o l i n g c e a s e s ? I t i s a r i s k t h a t w i l l n e e d t o b e e v a l u a t e d a s t h e p r o j e c t a d v a n c e s . 9 9 M a y o r B u r n e t t N A 1 1 / 1 4 / 2 0 1 2 F o r P M L , h o w d o c o s t s c h a n g e i f e x i s t i n g i n t a k e s y s t e m i s u n u s a b l e ? F r o m a t e c h n i c a l p e r s p e c t i v e , t h e r e i s n o r e a s o n t o b e l i e v e t h e e x i s t i n g i n t a k e c o u l d n o t b e r e u s e d . 1 0 0 M a y o r B u r n e t t N A 1 1 / 1 4 / 2 0 1 2 H o w s h o u l d w e e v a l u a t e s c h e d u l e r i s k v e r s u s c o s t o f w a t e r ? T h e r e a r e b a r r i e r s t o i m p l e m e n t a t i o n o f a n y o f t h e t h r e e p r o j e c t s . W i t h t h e 2 0 1 6 d e a d l i n e , s c h e d u l e r i s k s h o u l d l i k e l y h a v e p r i m a c y i n t h e a b s e n c e o f „ g r o s s c o s t d i f f e r e n t i a l s . 1 0 1 M a y o r B u r n e t t N A 1 1 / 1 4 / 2 0 1 2 H o w m u c h w i l l i t c o s t o u r c o m m u n i t i e s t o h a v e a p r o j e c t d e l a y e d b y 6 m o n t h s ? U n k n o w n . 1 0 2 M a y o r B u r n e t t N A 1 1 / 1 4 / 2 0 1 2 W h a t c a n b e l e a r n e d a b o u t s c h e d u l e r i s k ( e s p e c i a l l y f o r o p e n o c e a n i n t a k e ) f r o m t h e P o s e i d o n e x p e r i e n c e ? T h e y a r e c u r r e n t l y n o t t h e p r e f e r r e d a l t e r n a t i v e w i t h i n S t a t e r e g u l a t o r y a u t h o r i t i e s a n d t h e r e f o r e s u b j e c t t o u n k n o w n s c h e d u l e r i s k . T h e o v e r a l l r e g u l a t o r y f r a m e w o r k h a s c h a n g e d s i n c e P o s e i d o n s t a r t e d i t s p r o j e c t , s o i t ' s d i f f i c u l t t o d r a w f i r m c o n c l u s i o n s . 1 0 3 D o u g W i l h e l m N A 1 1 / 1 4 / 2 0 1 2 Q u e s t i o n e d t h e u s e o f S u r c h a r g e 2 f o r f u n d i n g a p o r t i o n o f t h e C a l - A m p r o j e c t , s u g g e s t i n g t h a t i t s h o u l d b e m a d e a v a i l a b l e t o t h e p u b l i c p r o j e c t s o r r e m o v e d f r o m t h e C a l - A m a n a l y s i s — e s p e c i a l l y s i n c e t h e C P U C m a y n o t a l l o w i t i n w h o l e o r i n p a r t . T h e s u r c h a r g e I s s u e i s c u r r e n t l y b e i n g e x a m i n e d t h r o u g h t h e C P U C a n d i s n o t i n c l u d e d i n t h e s c o p e o f t h i s e v a l u a t i o n . 1 0 4 D a l e H e k h u i s N A 1 1 / 1 4 / 2 0 1 2 A l s o q u e s t i o n s t h e u s e o f S u r c h a r g e 2 . S e e a b o v e . 1 0 5 S a f w a t M a l e k N A 1 1 / 1 4 / 2 0 1 2 Q u e s t i o n e d w h y t h e c a p i t a l c o s t s f o r t h e C a l - A m p r o j e c t a r e s o m u c h l o w e r t h a n C a l - A m ' s p u b l i s h e d e s t i m a t e s i n t h e i r a p p l i c a t i o n a n d p r e s e n t a t i o n s t o t h e c o m m u n i t y . C a l A m ' s c o s t o f f i n a n c i n g w i l l b e a d j u s t e d i n t h e f i n a l r e p o r t . 1 0 6 D a v e S t o l d t 5 - 8 1 1 / 1 3 / 2 0 1 2 t w o l i n e s u p f r o m b o t t o m — " C a l - A m " s h o u l d r e a d " D W D " W i l l c o r r e c t . 1 0 7 D a v e S t o l d t 5 - 4 1 1 / 3 0 / 2 0 1 2 R e p l a c e T e x t i n F o o t n o t e 3 : C a p i t a l r e c o v e r y f a c t o r f o r D I N O a n d P M L b a s e d o n a n i n t e r e s t r a t e O f 4 . 0 % a n d t e r m o f 3 0 y e a r s ; b a s e d o n a n i n t e r e s t r a t e o f 8 . 4 9 % a n d 3 0 y e a r s f o r C a l - A m A C a p i t a l R e c o v e r y F a c t o r ( C R P ) i s u s e d t o c o n v e r t a s i n g l e u p - f r o n t c a p i t a l c o s t I n t o a n a n n u a l a m o u n t t o b e r e c o v e r e d , a s i f t h e m o n e y w a s r e p a i d a s a l o a n , b a s e d o n a n i n t e r e s t r a t e a n d t i m e p e r i o d . A s l i s t e d i n N o t e 3 o n T a b l e 5 - 2 , a C R F w a s u s e d f o r t h e D V V D a n d P M L p r o j e c t s a t a n i n t e r e s t r a t e o f 4 . 0 p e r c e n t . T h i s r a t e a p p r o x i m a t e s t h e c o s t o f t a x - e x e m p t b o r r o w i n g f o r p u b l i c l y f i n a n c e d p r o j e c t s w h i c h w o u l d l i k e l y b e a p p l i c a b l e t o D V V D a n d P M L . I n t h i s c a s e , t h e C R F e q u a l s 0 . 0 5 7 8 3 C a l - A m m a y n o t h a v e a c c e s s t o p u b l i c f i n a n c i n g a n d c o u l d h a v e a p r e - t a x w e i g h t e d c o s t o f c a p i t a l b a s e d o n 5 . 0 p e r c e n t m a r k e t - r a t e d e b t ( t h e i r a u t h o r i z e d d e b t r e t u r n i s 6 . 6 3 % ) a n d 9 . 9 9 % p e r c e n t e q u i t y r e t u r n , g r o s s e d u p f o r i n c o m e a n d a d v a l o r e m t a x e s . T h i s w o u l d r e s u l t I n h i g h e r a n n u a l c o s t s f o r C a l - A m t h a n s h o w n . H o w e v e r , t h e r e a r e a d d i t i o n a l d i f f e r e n c e s i n h o w p u b l i c v e r s u s p r i v a t e c a p i t a l i n v e s t m e n t s a r e a m o r t i z e d , t h e i m p a c t s o f w h i c h a r e n o t a n a l y z e d i n t h i s r e p o r t . T h e M o n t e r e y P e n i n s u l a W a t e r M a n a g e m e n t D i s t r i c t h a s c o m p u t e d t h a t f o r C a l - A m , a C R F r e p r e s e n t i n g t h e a v e r a g e a n n u a l c a p i t a l r e c o v e r y o v e r a 3 0 - y e a r p e r i o d e q u a l s 0 . 9 2 9 3 3 w h i c h w o u l d r e s u l t a s i f t h e i n t e r e s t r a t e w a s 8 . 4 9 % . T h i s C R F i s c o m p u t e d a s f o l l o w s : { [ ( P r e - T a x E q u i t y R e t u r n : 9 . 9 9 % x 5 3 % x 1 . 6 9 g r o s s - u p ) + ( P r e - T a x D e b t R e t u r n : 5 % x 4 7 % x 1 . 6 9 ) - ( I n t e r e s t P a i d T a x O f f - S e t : 5 % x 4 0 . 2 5 % e f f e c t i v e t a x r a t e d i v i d e d b y . 9 9 7 3 6 c o l l e c t i b l e s r a t e ) ] + ( A d V a l o r e m T a x e s : 1 . 0 5 % ) ] } / 2 + ( 3 . 3 3 % a n n u a l d e p r e c i a t i o n ) = 0 . 0 9 2 9 3 3 p r o x y C R F W i l l u p d a t e . W i l l u p d a t e . 1 0 8 D a v e S t o l d t 5 - 5 1 1 / 3 0 / 2 0 1 2 P a g e 1 0 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 154, Packet Page 180 M P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s D R A F T R E P O R T . . . . - . . C d r i f i r i e b t , B y — • • - • - - • P a e . - - 9 - • ', h 1 b " . • „ ' D a t e o f - - - - 1 0 3 m m e n t , . . . . . : • C o t h r i i e h t 6 R e s p o n s e / A c t i o n . . — . •, , . 1 0 9 L a r r y P a r r i s h N A 1 1 / 2 7 / 2 0 1 2 I n d e p e n d e n t f a c t c h e c k i n g - S e v e r a l m o n t h s a g o ( p e r h a p s a y e a r ) C a l - A m p r o d u c e d a n I n t e r n a l s t u d y o n c o m p a r a t i v e c o s t s o f a n e w w a t e r p r o j e c t , w h i c h i n c l u d e d a b o u t 1 1 d i f f e r e n t o p t i o n s c o v e r i n g d e s a l i n a t i o n , A S R ( a q u i f e r s t o r a g e & r e c o v e r y ) , G W R ( g r o u n d w a t e r r e c o v e r y ) , c o n s e r v a t i o n , a n d p e r h a p s o t h e r s o u r c e s . T h e o p t i o n s c o v e r e d v a r y i n g c o m b i n a t i o n s o f t h e s e w a t e r s o u r c e s a n d t h e c o s t s f o r e a c h o p t i o n , i n c l u d i n g d e s a l . W e l l , i f y o u r e v i e w t h a t C a l - A m s t u d y I t h i n k y o u w i l l f i n d t h a t t h e e s t i m a t e d c o s t s o f t h e C a l - A m w a t e r p r o j e c t ( d e s a l ) i n t h a t s t u d y v a r y g r e a t l y f r o m t h e e s t i m a t e d c o s t s r e p r e s e n t e d i n t h e S P I R e p o r t a n d t h e f i n a n c i a l a n a l y s i s p r e p a r e d b y t h e M P W M D f o r t h e M P R W A . W h y i s t h e r e s u c h a d i f f e r e n c e i n c o s t s b e t w e e n t h e s e t w o s t u d i e s ? W h a t h a s c h a n g e d ? A l s o , e v i d e n t l y t h e t h r e e p r o p o n e n t s o f d e s a l p r o p o s a l s a n s w e r e d a 5 5 q u e s t i o n q u e s t i o n a i r e . I s t h e r e i n d e p e n d e n t v e r i f i c a t i o n o f t h e i n f o r m a t i o n t h a t w a s p r o v i d e d i n t h o s e q u e s t i o n a i r e s ? I f n o t , t h e r e c e r t a i n l y s h o u l d b e . T o b e s u r e , A L L o f t h e i n f o r m a t i o n p r o v i d e d b y C a l - A m , D W D , a n d P M L s h o u l d b e v e r i f i e d b y i n d e p e n d e n t s o u r c e s . T h i s s t u d y e v a l u a t e d c o s t s p r o v i d e d b y t h e p r o p o n e n t s a s o f O c t o b e r 1 5 , 2 0 1 2 f o r t h e i r c u r r e n t p r o j e c t s . E v a l u a t i o n o f o t h e r c o s t e s t i m a t e s w a s n o t a p a r t o f o u r e v a l u a t i o n . V V i t h r e g a r d t o t h e p r o p o n e n t q u e s t i o n n a i r e s , w e d i d e v a l u a t e t h e i r r e s p o n s e s a s p a r t o f t h e i n f o r m a t i o n w e r e v i e w e d a n d c o n s i d e r e d a s p a r t o f w o r k . W h e r e w e f o u n d t h e i n f o r m a t i o n w a s i n s u f f i c i e n t , w e a s k e d a d d i t i o n a l q u e s t i o n s o f t h e p r o p o n e n t s a n d / o r a d j u s t e d c o s t s i n o u r e c o n o m i c e v a l u a t i o n . 1 1 0 L a r r y P a r r i s h N A 1 1 / 2 7 / 2 0 1 2 T o t a l C o s t s o f D e s a l - A n y e s t i m a t e s o f t h e c o s t o f a n e w d e s a l p l a n t M U S T i n c l u d e A L L o f t h e c o s t s a s s o c i a t e d w i t h t h e c o n s t r u c t i o n o f t h e d e s a l p l a n t , T h i s w o u l d i n c l u d e t h e $ 9 9 m i l l i o n s u r c h a r g e ; f i n a n c e c h a r g e s ; p r o f i t s b y t h e b u i l d e r o f t h e p l a n t ( C a l - A m ) ; l i t i g a t i o n c o s t s ; w e l l s ; l a n d a c q u i s i t i o n ; e t c . A L L c o s t s m u s t b e i n c l u d e d ! I I W e b e l i e v e a l l a p p l i c a b l e c o s t s r e l a t e d t o t h e f a c i l i t y p e r m i t t i n g , d e s i g n a n d c o n s t r u c t i o n h a v e b e e n c o n s i d e r e d . 1 1 1 L a r r y P a r r i s h N A 1 1 / 2 7 / 2 0 1 2 D e l a y s - D e l a y s i n p e r m i t t i n g , c o n s t r u c t i o n , l i t i g a t i o n , p o l i t i c a l d i c k e r i n g , e t c . w i l l u n d o u b t e d l y i n c r e a s e t h e f i n a l p r i c e t a g o f t h e d e s a l p r o j e c t a n d t h e s e s h o u l d a l s o b e i n c l u d e d i n t h e t o t a l c o s t , T h i s m a y e n t a i l s o m e d i f f i c u l t y i n e s t i m a t i n g t h e c o s t s d u e t o d e l a y s , b u t s h o u l d b e i n c l u d e d a t l e a s t a s e s t i m a t e d c o s t s . T h e r e c o m m e n d e d 3 0 p e r c e n t o v e r a l l p r o j e c t c o n t i n g e n c y s h o u l d b e s u f f i c i e n t t o c o v e r m a n y o f t h e u n k n o w n s r e l a t e d t o t h e p r o j e c t a t t h i s t i m e . 1 1 2 L a r r y P a r r i s h N A 1 1 / 2 7 / 2 0 1 2 M i s s i n g t h e d e a d l i n e - T h e r e i s a d e a d l i n e i n t h e C D O 9 5 - 1 0 w h i c h c o u l d a l s o e f f e c t t h e f i n a l p r i c e t a g o f d e s a l . M y o p i n i o n i s t h a t t h e w a t e r w i l l n o t b e s h u t o f f - a f f e c t e d c i t i e s a n d t h e c o u n t y c a n d e c l a r e a s t a t e o f e m e r g e n c y w h i c h w i l l o v e r r i d e t h e o r d e r b y t h e S t a t e W a t e r B o a r d . H o w e v e r , s o m e r a t i o n i n g m a y o c c u r . I f r a t i o n i n g d o e s o c c u r , t h i s c o u l d a l s o a f f e c t t h e f i n a l p r i c e o f d e s a l i n a t i o n . C a l - A m h a s s t a t e d p u b l i c l y s e v e r a l t i m e s t h a t i f c o n s e r v a t i o n ( a l s o k n o w n a s r a t i o n i n g ) I n c r e a s e s , t h e c o s t o f w a t e r p e r a c r e - f o o t ( 3 / A F ) w i l l a l s o i n c r e a s e i n s o m e p r o p o r t i o n a t e f o r m u l i z e d f a s h i o n . C a l - A m h a s f i x e d c o s t s • a n d a r e l e g a l l y e n t i t l e d t o r e c o v e r t h o s e c o s t s . T h e a c t u a l a m o u n t o f w a t e r t h e y d i s t r i b u t e i s t h e n s o m e w h a t i r r e l e v a n t . I f t h e y s e l l a m i l l i o n A F o f w a t e r , o r t e n m i l l i o n A F , t h e y w i l l s t i l l a t t e m p t ( s u c c e s s f u l l y ) t o r e c o v e r a r e l a t i v e l y s i m i l a r a m o u n t f r o m t h e r a t e p a y e r b a s e d o n t h e i r e x p e n s e s . T h i s m e a n s a R A T E I N C R E A S E . W e l l , s u c h a r a t e I n c r e a s e w i l l i n c r e a s e t h e o v e r a l l p r i c e p e r A F o f w a t e r , w h i c h w i l l l i k e w i s e a f f e c t t h e f i n a l a v e r a g e $ / A F o f t h e o v e r a l l p r o j e c t . T h i s s h o u l d b e f a c t o r e d i n t o y o u r e v a l u a t i o n a l s o . . I g u e s s y o u n e e d t o d e t e r m i n e h o w s o o n e a c h p r o j e c t c a n b e c o m p l e t e d , a n d o f c o u r s e t h e l o n g e r i t t a k e s t o c o m p l e t e t h e p r o j e c t , t h e m o r e e x p e n s i v e i t w i l l b e . T h e o u t c o m e o f a m i s s e d d e a d l i n e i s s p e c u l a t i v e a t t h i s t i m e ; a n d a n e v a l u a t i o n o f t h e i m p a c t s a r e o u t s i d e t h e s c o p e o f o u r e v a l u a t i o n . 1 1 3 L a r r y P a r r i s h N A 1 1 / 2 7 / 2 0 1 2 C o s t c o n t r o l s - T h i s m a y n o t f i g u r e i n t o y o u r e v a l u a t i o n a t t h i s t i m e , b u t u p o n s e l e c t i o n o f a n d a p p r o v a l o f a f i n a l p r o j e c t , t h e r e s h o u l d b e s u f f i c i e n t c o s t c o n t r o l g u a r a n t e e s w r i t t e n i n t o t h e f i n a l a g r e e m e n t . C o s t o v e r r u n s s h o u l d b e a c c o u n t e d f o r a n d c o s t s b e y o n d t h a t s h o u l d b e b o m e b y t h e b u i l d e r o f t h e p r o i e c t . . N o t e d . P a g e 1 1 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 155, Packet Page 181 M P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s . . . D R A F T R E P O R T N o : • • C o m m e n t B y P a g e . N o . , D a t e o f . . C o m m e n t • • • - • . S C O r n M e J l t s ' • •• R e s p o n s e / A c t i o n . • ' ' — 1 1 4 A l a n H a i f a N A 1 1 / 2 7 / 2 0 1 2 T h e R e p o r t m a k e s i t s o u n d l i k e t h e f a c t t h a t C a l A m ' s s l a n t w e l l s w i l l b e i n t h e p a t h o f f u t u r e s h o r e . e r o s i o n i n t h e n e x t 4 0 y e a r s a m i n o r i s s u e b e c a u s e t h e l i f e o f t h e p r o j e c t i s o n l y 3 0 y e a r s . T h a t s e e m s i n s a n e t o m e . W e a r e s p e n d i n g 2 0 0 + m i l l i o n a n a p r o j e c t w h o s e l i f e i s o n l y 3 0 y e a r s ? I f w e h a v e t o r e d r i l l t h e s l a n t w e l l s i n 3 0 y e a r s , a s h o r t w i n d o w f o r s u c h a l a r g e c a p i t a l p r o j e c t i f y o u a s k m e , t h e n t h a t c o s t s h o u l d b e f a c t o r e d i n t o t h e i r p l a n . I n m y v i e w , t h e s h o r e e r o s i o n i s a " f a t a l f l a w " f o r t h e C a l A m p l a n , C a l A m i s c u r r e n t l y e v a l u a t e d d e s i g n a n d l o c a t i o n o f t h e s l a n t w e l l f a c i l i t i e s t h a t w i l l p l a c e m a j o r i n f r a s t r u c t u r e o u t s i d e o f t h e e r o s i o n z o n e . F u r t h e r , a s u p p l e m e n t a l e v a l u a t i o n w i l l e x a m i n e t h e i m p a c t o f i n c r e a s e r e p l a c e m e n t f r e q u e n c y f o r t h e s l a n t w e l l s . 1 1 5 A l a n H a i f a 5 - 4 , 5 - 5 1 1 / 2 7 / 2 0 1 2 T h e R e p o r t a s s u m e s t h a t a l l t h r e e p r o j e c t s w i l l s p e n d t h e s a m e a m o u n t o n f i n a n c i n g , b u t i s t h a t a r e a s o n a b l e a s s u m p t i o n ? M y u n d e r s t a n d i n g i s t h a t C a l A r n c a n n o t b o r r o w a t t h e p r e f e r r e d r a t e s a g o v e r n m e n t b o d y c a n , b u t t h e o t h e r t w o p r o j e c t s w i l l n o t g o f o r w a r d w i t h o u t a s p o n s o r i n g p u b l i c a g e n c y a n d t h e c o r r e s p o n d i n g l y l o w e r b o n d r a t e s . T h i s s e e m s l i k e a l a r g e c o s t f a c t o r t h a t t h e S P I r e p o r t i g n o r e s e s s e n t i a l l y . ( S e e n o t e 3 a n d b o t t o m o f p a g e 5 - 4 a n d 5 - 5 , w h i c h s a y s t h a t a " u n i f o r m c a p i t a l r e c o v e r y f a c t o r w a s u s e d a c r o s s a l l t h r e e p r o j e c t s a t a n i n t e r e s t r a t e o f 4 , 0 p e r c e n t . " ) . M y e s t i m a t e b a s e d o n t h e p e r c e n t s g i v e n o n 5 - 5 i s t h a t f i n a n c i n g f o r C a l A m w o u l d c o s t 2 2 M i l l i o n m o r e . C a l A m ' s c o s t o f f i n a n c i n g w i l l b e a d j u s t e d i n t h e f i n a l r e p o r t . 1 1 6 A l a n H a i f a 3 - 3 1 1 / 2 7 / 2 0 1 2 T h e R e p o r t c l a i m s o n p a g e 3 - 3 t h a t t h e r e w i l l b e n o p e r m a n e n t a e s t h e t i c i m p a c t s f r o m C A L A m s p r o j e c t , b u t t h e i r s l a n t w e l l s w i l l o c c u p y 7 0 0 f e e t o f s h o r e l i n e w i t h i n d u s t r i a l e q u i p m e n t i n a p l a c e t h a t c u r r e n t l y h a s n o t h i n g l i k e t h a t - h o w c a n t h a t n o t b e a p e r r n e n a n t n e g a t i v e a e s h t e t i c i m p a c t ? T h e i n t a k e p u m p s w i l l b e l o c a t e d i n s u b g r a d e v a u l t s , l i m i t i n g t h e s u r f a c e i m p a c t s . 1 1 7 A l a n H a f f a 3 - 7 1 1 / 2 7 / 2 0 1 2 T h e c l a i m o n p a g e 3 - 7 a b o u t D I N D s t r e t c h e s c r e d i b i l i t y : " t h e r e i s n o e x p e r e i n c e w i t h t h e e f f e c t o f w a r m i n g a d e e p s o u r c e s u p p l y . T h e r e i s p o t e n t i a l f o r t h e i n c r e a s e i n t e m p e r a t u r e t o c a u s e a n i n c r e a s e i n b i o l o g i c a l a c t i v i t y a n d a s s o c i a t e d b i o l o g i c a l f o u l i n g w i t h i n t h e t r e a m e n t p r o c e s s . " R e a l l y ? T h e y a r e t a k i n g w a t e r f r o m d e e p u n d e r t h e o c e a n w h e r e t h e r e i s f a r l e s s o r g a n i c m a t e r i a l t o b e g i n w i t h , a n d B i o f o u l i n g o f S O m e m b r a n e s i s a c o m m o n c h a l l e n g e f o r o p e n - i n t a k e s e a w a t e r d e s a l f a c i l i t i e s a n d i s n o t p r i m a r i l y a c o n s e q u e n c e o f m u l t i c e l l u l a r m a r i n e o r g a n i s m s , b u t r a t h e r b a c t e r i a - w h i c h c a n b e p r e s e n t a t d e p t h . G e n e r a l l y , b a c t e r i a l g r o w t h r a t e s a n d p a t t e r n s c a n a c c e l e r a t e w i t h i n c r e a s e s i n t e m p e r a t u r e - a f e a t u r e t h a t h a s b e e n o b s e r v e d a t f a c i l i t i e s t r e a t i n g t h e w a r m w a t e r r e t u r n f r o m p o w e r p l a n t s . f i l t e r i n g i t . N o w , a r e w e s u p p o s e d t o b e l i e v e t h a t I n t h e a m o u n t o f t i m e I t t a k e s t o w a r m t h e w a t e r a n d p i p e i t t o t h e t r e a t m e n t c e n t e r t h a t t h i s d e e p w a t e r w i l l s u d d e n l y s p r o u t w i t h l i f e ? I t s e e m s l i k e a v e r y w e a k a s s u m p t i o n o n t h e p a r t o f S P I a n d w h i l e i t i s t r u e t h a t t h e r e i s n o e x p e r i e n c e p r o v i n g o t h e r w i s e , t h e r e i s a l s o n o e x p e r i e n c e p r o v i n g t h a t i t w i l l o c c u r a n d c o m m o n s e n s e a r g u e s a g a i n s t i t . H o w w i l l s o u r c e w a t e r t h a t i s l o w e r i n " t u r b i d i t y a n d s u s p e n d e d s o l i d s " t h a n t h e o t h e r t w o p r o j e c t s s u d d e n l y e x p e r i e n c e a n o u t b r e a k i n b i o l o g i c a l f o u l i n g j u s t b e c a u s e o f w a r m i n g t h e w a t e r ? 1 1 8 A l a n H a i f a 3 - 8 1 1 / 2 7 / 2 0 1 2 O n p a g e 3 - 8 " t h e n a t u r e o f t h e a g r e e m e n t b e t w e e n D V V D a n d D y n e g y i s s t i l l c o n f i d e n t i a l b e t w e e n t h e p a r t i e s " I S a l e g i t i m a t e c o n c e m . T h e p u b l i c n e e d s t o k n o w t h e n a t u r e o f t h a t a g r e e m e n t t o p r e d i c t l o n g t e r m c o s t s a n d t h a t i s a n o n - s t a r t e r t o a n y n e g o t i a t i o n s w i t h D V V D . T h e a g r e e m e n t i s n e a r i n g c o m p l e t i o n a n d s h o u l d b e a v a i l a b l e f o r r e v i e w s o o n . T h e o v e r a l l r i s k i s l o w a s d e s c r i b e d a b o v e . 1 1 9 A l a n H a i f a 3 - 1 0 1 1 / 2 7 / 2 0 1 2 O n p a g e 3 - 1 0 t h e r e p o r t c l a i m s t h a t P M L i s I n a f l o o d p l a i n . H o w s e r i o u s i s t h i s t h r e a t ? H o w o f t e n h a s t h e a r e a b e e n f l o o d e d i n t h e p a s t 1 0 0 y e a r s ? C a n t h e f a c i l i t y b e b u i l t t o b e f l o o d p r o t e c t e d ? • 1 2 0 A l a n H a i f a N A 1 1 / 2 7 / 2 0 1 2 T h e p i p e d i s r e p a i r i n P M L i s l e g i t i m a t e c o n c e r n b u t i t s e e m s l i k e I t s h o u l d i n v o l v e l e s s p e r m i t t i n g c o s t s t o r e p a i r e x i s t i n g p i p e s r a t h e r t h a n s e e k p e r m i s s i o n t o i n s t a l l n e w o n e s . I t s e e m s l i k e g i v e n t h e c o n c e r n s w i t h t h e p i p e s a n d p u m p s , P M L s h o u l d a s s u m e a l l n e w e q u i p m e n t I n c o s t i n g t h e p r o j e c t . I n c o m p a r i n g P M L a n d D W D I w o u l d l i k e t o s e e a c o s t c o m p a r i s o n t h a t a s s u m e s n e w e q u i p m e n t / c a p i t a l f o r P M L . A s s t a t e d a b o v e , P M L h a s i n c l u d e d c o s t s f o r r e p a i r o f i t s i n t a k e a n d o u t f a l l f a c i l i t i e s ; a l o n g w i t h a n o v e r a l l 3 0 % c o s t c o n t i n g e n c y w e a p p l i e d i n o u r e v a l u a t i o n . 1 2 1 A l a n H a i f a 4 6 N A 1 1 / 2 7 / 2 0 1 2 1 1 / 2 7 / 2 0 1 2 O n p a g e 4 - 6 t h e r e p o r t a r g u e s t h a t a n " u n k n o w n l e v e l o f o r g a n i c s m a y b e p r s e n t i n t h e h a r b o r - e x t r a c t e d s u p p l y . " T h i s s e e m s r e a s o n a b l e ; h o w e v e r , i t a l s o s e e m s l i k e l y f o r t h e C a l A m s l a n t w e l l , w h i c h a f t e r a l l , i s t a k i n g w a t e r f r o m b e n e a t h s a n d d u n e s . T h e o n l y p r o j e c t t h a t c a n r e a s o n a b l e a s s u m e a l o w l e v e l o f o r g a n i c s i n s o u r c e w a t e r i s D W D T h e R e p o r t r i g h t l y a s s u m e s t h a t D W D a n d P M L w i l l a d d s e c o n d p a s s r e v e r s e o s o m o s i s , j u s t l i k e C a l A m p r o p o s e s . W e c a n ' t a f f o r d t o s p e n d t h i s m u c h m o n e y a n d t h e n h a v e a p o o r t a s t i n g s u p p l y o f w a t e r . T h a t w o u l d b e a h o r r i b l e o u t c o m e D i s a g r e e , t h e l e v e l o f o r g a n i c s i n w e l l s u p p l i e s i s g e n e r a l l y l o w e r t h a n i n o p e n i n t a k e s . A g r e e d . 1 2 2 A l a n H a i f a 1 2 3 A l a n H a i f a 3 - 2 1 1 / 2 7 / 2 0 1 2 T h e r e p o r t s a y s t h a t C a l A m w i l l h a v e t o a c q u i r e l a n d f o r i t s t r e a t m e n t f a c i l i t y t h a t i t d o e s n o t o w n a n d t h a t i t c o u l d u s e e m i n e n t d o m a i n . I t w a s n ' t c l e a r t o m e t h a t t h e c o s t i n g i n c l u d e d t h e c o s t o f t h i s l a n d a c q u i s i t i o n a n d l i k e l y c o u r t r e l a t e d c o s t s i f i t w e n t t o e m i n e n t d o m a i n . A s i d e f r o m t h a t , I d o n ' t k n o w t h a t w e w a n t t o b e a s s o c i a t e d w i t h a p r o j e c t t h a t h a s t o u s e e m i n e n t d o m a i n i f o t h e r o p t i o n s a r e a v a i l a b l e . B a s e d o n t h i s , I h a v e e v e n m o r e c o n c e r n s w i t h t h e C a l A m p r o p o s a l b o t h b e c a u s e o f t h e S l a n t W e l l s ( a e s t h e t i c i m p a c t A N D e r o s i o n a n d c o s t o f r e b u i l d i n g ) a n d t h e p o t e n t i a l l i t i g a t i o n o v e r e m i n e n t d o m a i n , A d d i t i o n a l l y , i t i s s t i l l t h e m o s t e x p e n s i v e p l a n e v e n w h e n y o u a s s u m e c o m p a r a b l e b o n d r a t e s , w h i c h i s a b a d a s s u m p t i o n . T h e c o s t o f e m i n e n t d o m a i n a c q u i s i t i o n o f C a l A m ' s s i t e i s n o t e x p e c t e d t o s i g n i f i c a n t l y i n c r e a s e c o s t o r t h e o v e r a l l p r o j e c t s c h e d u l e . C a l A m i s a c t i v e l y e n g a g e d i n a c q u i r i n g i t s p r o p o s e d s i t e a t t h i s t i m e . 1 2 4 D o n L e w N A 1 2 / 4 / 2 0 1 2 M o s s L a n d i n g C o m m e r c i a l P a r k w a y ( M L C P ) p r o v i d e d S P I w i t h f u l l r e s p o n s e s t o t h e i r r e q u e s t s f o r i n f o r m a t i o n r e g a r d i n g t h e p r o p o s e d d e s a l p l a n t a t M L C P . T h e i n f o r m a t i o n p r o v i d e d b y M L C P h a s b e e n d i s t o r t e d i n t h e e v a l u a t i o n p r e p a r e d b y S P I a n d d o e s n o t a c c u r a t e l y r e f l e c t o u r r e s p o n s e s . W e f e e l w e f a i r l y r e p r e s e n t e d i n f o r m a t i o n p r o v i d e d b y P M L i n o u r . e v a l u a t i o n a n d r e p o r t . P a g e 1 2 o f 1 3 M P R W A . D r a f t R e p o r t . l i e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 156, Packet Page 182 I N A P R W A E V A L U A T I O N O F S E A W A T E R D E S A L I N A T I O N P R O J E C T S N o v e m b e r 2 0 1 2 D r a f t R e p o r t R e v i e w C o m m e n t s a n d R e s p o n s e s D R A F T R E P O R T . . C O n n e n t ' 3 y ' P ' a - g o N o . . D a t i e - : o f C o m m e n t - , C o m m e n t s - R e s p o n s e / A c t i o n 1 2 5 D o n L e w N A 1 2 / 4 / 2 0 1 2 W e w i l l n o t c o n t i n u e t o p a r t i c i p a t e i n a s o - c a l l e d c o m p a r i s o n w h e n t h e i n f o r m a t i o n p r o v i d e d t o y o u f o r c o m p a r i s o n h a s b e e n d i s t o r t e d , m i s i n t e r p r e t e d a n d c h a n g e d w i t h o u t o u t p e r m i s s i o n . T h e r e p o r t i s s o l e l y t h e w o r k p r o d u c t o f S P ! a n d K H C . 1 2 6 D o n L e w N A 1 2 / 4 / 2 0 1 2 I f y o u w a n t i n f o r m a t i o n a s t o w h a t w e a r e r e f e r r i n g t o w i t h r e g a r d t o t h e i n a c c u r a c i e s p l e a s e c a l l m e s o t h e s u p p o r t i n g d o c u m e n t a t i o n c a n b e p r o v i d e d t o y o u . I c a n b e r e a c h e d a t 9 2 5 - 5 8 6 - 2 4 3 3 . P e r i n s t r u c t i o n s f r o m t h e M P R W A , a l l c o m m e n t s w e r e t o b e p r o v i d e d i n w r i t i n g . P a g e 1 3 o f 1 3 M P R W A . D r a f t R e p o r t . R e v i e w C o m m e n t s MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 157, Packet Page 183 EXI I IT 8 MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 158, Packet Page 184 TO: FROM: DATE: SUBJECT: MEMORANDUM Mayor Jason Burnett, Chair Technical Advisory Group Kris Helm, Consultant January 29, 2013 Permitting Concerns, Open Intake You asked for additional information regarding the preference of regulatory agencies for the type of intake structure to be used for ocean desalination plants. Unfortunately, there has not been formal rulemaking completed to provide the rules for approval of new intakes. In our report we noted that the State issued an "Ocean Desalination Planning Handbook" which may offer some helpful advice. I think that the clearest statements regarding the evaluation of these intakes may be in the NOAA policy guidelines for the Monterey Bay National Marine Sanctuary (MBNMS). It is possible that the State Water Resources Control Board could initiate a rulemaking which would prescribe standards for' a new intake structure. This would be done under authority similar to Section 316b of the Clean Water Act wherein the regulation of intake structures is a part of the regulation of waste discharge enabled by the intake. But as noted in our report, that is highly speculative. It is clear however that NOAA will have discretionary approval for any new intake structure and would act after reviewing the actions of the California Coastal Commission and other State agencies. In our report, I paraphrased the applicable sections of the State and Federal Policies. Below I have reproduced a portion of the Guidelines from NOAA. I believe the Coastal Commission would have very similar concerns. Guidelines for Entrainment and Impingement: o All desalination plants in the MBNMS should be designed and sited to avoid and minimize impingement and entrainment to the extent feasible. Desalination project proponents should investigate the feasibility of using subsurface intakes as an alternative to traditional intake methods. Other options for consideration should include, but may not be limited to: vertical and radial beach wells, horizontal directionally drilled (HDD) and slant-drilled wells, seabed filtration systems and other sub-seafloor structures. Where feasible and beneficial, subsurface intakes should be used. It must be ensured however, that they will not cause saltwater intrusion to aquifers, negatively impact coastal wetlands that may be connected to the same aquifer being used by the intake, and they must address the likelihood of increased coastal erosion in the future. Subsurface intakes have the potential to minimize or eliminate impingement and entrainment impacts and improve the performance and efficiency of a desalination project by providing a certain level of pretreatment. o In cases where it has clearly been determined that sub-surface intakes are not feasible and that an open ocean intake is necessary, the use of appropriately sited existing pipelines of acceptable structural integrity should be investigated and if feasible, pursued, to minimize impacts to the seafloor. If a new pipeline is necessary, subseafloor placement should be evaluated to minimize disturbances to biological resources and to recreational and commercial activities. o When it is necessary to use an open ocean intake, other methods to minimize impingement and entrainment should be evaluated and pursued. These should include design alternatives such as placement of the intake structure to avoid sensitive habitat or highly productive MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 159, Packet Page 185 areas, screening the intake ports, if feasible, increasing the number of intake ports, or decreasing the intake velocity. The project proponent should determine expected entrainment and impingement impacts associated with various intake velocities and screen mesh sizes, based upon long-term monitoring data from the area, including diurnal and seasonal variations in planktonic abundance and location. Any impacts to EFH and the biota it supports that cannot be avoided through project design or operations will require mitigation, as per NMFS' regulatory requirements. The necessary level of mitigation is to be determined through the use of a biologically based model, such as the habitat production foregone method, in order to account for all "non-use" impacts to affected biota. Mitigation projects should attempt to directly offset the impacted species or habitat (in-place, in-kind mitigation) although NOAA will work with the project proponent to identify appropriate mitigation if this is not possible. I think the guidelines adequately describe the standards that the proponent of an open-water intake would have to meet. In addition to describing the impacts of the new intake upon the MBNMS, the proponents would likely have to prove that a subsurface intake is either infeasible, or environmentally less desirable than the proposed open water intake. As further noted in the guidelines, evaluations of subsurface intakes would include not only slant wells, but radial collectors and engineered modifications to the seabed. The regulations obviously place a burden upon the proponent of an open water intake. Indeed it appears impossible to obtain permission to install an open-water intake without a convincing analysis of why it is preferable to any of several types of subsurface intake. If the initial analysis that is prepared in CEQA/NEPA is deemed inadequate by either the Coastal Commission or the NOAA to address the preference for subsurface intake specified in the policy guidelines, it is likely that a substantial delay could result from the regulatory agencies requiring additional and substantial analyses. In addition to the above guidelines, I think it is important to note that the Coastal Commission would review the project based upon how it "protects and enhances" the marine environment. Thus I believe it is quite possible that for either a subsurface or an open water intake, the Coastal Commission would require mitigation programs not just to offset impacted species or habitat, but also to enhance the biota. It is, I think, important to note that the policy guidelines also specify a need to justify an ocean desalination project against other alternatives such as conservation and water recycling. Moreover, the guidelines propose that any individual project be evaluated in the context of cumulative impacts from all projects in the region that would withdraw water from the MBNMS. In my mind the MPWMA and the MPWMD should cooperate with other entities in the region to describe the likely and necessary extent to which projects may rely upon water from the Monterey Bay and the return of waste brine. As one anticipates larger and larger uses of seawater cumulatively, it seems that the economic and environmental impacts of subsurface intakes become more severe. Indeed, it seems possible that for projects larger than some size (unknown to me), it would be infeasible to rely upon a subsurface intake. This is exemplar of why I feel it is important for public agencies tied to the local community perform the evaluations of preferred methods of intake for ocean desalination projects. Those agencies must decide: MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 160, Packet Page 186 o What is the size of regional projects that should be evaluated in cumulative impact analyses? o What are the economic criteria for assessing the feasibility of subsurface versus open intake? When does the economic advantage of one alternative become compelling? o What additional investment is appropriate to enhance the marine environment compared to mitigating adverse impacts? In any event, it is clearly in the interest of the Water Management Authority that the methods of intake be thoroughly evaluated and compared.to determine both a preferred method of intake and an appropriate mitigation program that protects the public trust values in the MBNMS. MPRWA Meeting, 2/28/2013 , Ìtem No. 2., Ìtem Page 161, Packet Page 187 Monterey Peninsula Regional Water Authority Agenda Report Date: February 28, 2013 Item No: 3. №08/12 FROM: Prepared By: Clerk to the Authority SUBJECT: Discuss Opportunity for Video Transmission Services through Access Monterey Peninsula (Milton) DISCUSSION: There is no written report for this item at this time. An oral will be provided at the meeting. MPRWA Meeting, 2/28/2013 , Ìtem No. 3., Ìtem Page 1, Packet Page 189
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