Title
Consider approving the Settlement Agreement on Monterey Peninsula Water Supply Project (“MPWSP”) Desalination Plant Return Water; and, authorizing the General Manager to execute the Settlement Agreement on MPWSP Desalination Plant Return Water, substantially in the form attached, subject to County Counsel approval.
Report
RECOMMENDATION:
It is recommended that the Monterey County Water Resources Agency Board of Supervisors:
Approve the Settlement Agreement on MPWSP Desalination Plant Return Water; and, authorize the General Manager to execute the Settlement Agreement on MPWSP Desalination Plant Return Water substantially in the form attached, subject to County Counsel approval.
SUMMARY:
The Agency Board of Directors and Agency Board of Supervisors approved, on January 25, 2016 and February 2, 2016, respectively, a Return Water Planning Term Sheet (“Term Sheet”), outlining the principles concerning an arrangement under which California American Water Company (“Cal-Am”) would provide Desalination Plant Return Water to Castroville Community Services District (“CCSD”) and the Agency’s Castroville Seawater Intrusion Project (“CSIP”). Use of this water will serve to decrease groundwater pumping by CCSD and the Agency.
The Term Sheet anticipated that certain Parties to the Term Sheet would negotiate and enter into water purchase agreements under which Cal-Am would deliver Return Water. This Settlement Agreement on MPWSP Desalination Plant Return Water (“Settlement Agreement”) and a companion Return Water Purchase Agreement are now the result of those negotiations.
DISCUSSION:
Cal-Am proposes a Monterey Peninsula Water Supply Project (“MPWSP” or “Project”) which includes a desalination plant that will provide a potable water supply for Cal-Am’s Monterey Peninsula service area. Rather than using an open-ocean intake that would produce only seawater as source water for the desalination plant, the Project desalination plant will produce its source water from subterranean slant wells drilled adjacent to the ocean, which will draw water from strata underlying the ocean. The location of the wells overlies the western portion of the Salinas River Groundwater Basin (SRGB”). The ratio of seawater to brackish SRGB groundwater in the Project source water is anticipated to change over time, with more seawater and less SRGB groundwater anticipated later in the Project’s life.
Cal-Am asserts that source water production by the Project is unlikely to cause significant adverse environmental effects with respect to SRGB groundwater resources and is unlikely to cause injury to prior groundwater rights in the SRGB but submits that the Monterey County Water Resources Agency Act (“Agency Act”) authorizes the Agency to obtain an injunction prohibiting the export and use of SRGB groundwater outside of the SRGB and certain areas of Fort Ord.
Accordingly, to meet applicable requirements of the Agency Act, Cal-Am has proposed, as part of the MPWSP, to make available for delivery to groundwater users overlying the SRGB a volume of water equal to the percentage of SRGB groundwater in the total MPWSP source water production, as determined by the Agency (“Return Water”).
The Term Sheet provided that Cal-Am deliver Return Water to CCSD and to the CSIP to satisfy Return Water requirements that may arise out of the Agency Act, CEQA, or California groundwater law, in accordance with terms and conditions to be agreed upon based on the general principles contained in the Term Sheet. The Agency, Salinas Valley Water Coalition, Monterey County Farm Bureau, and Landwatch Monterey County (collectively, “The Parties”) support Cal-Am’s delivering Return Water to CCSD and to the Project for use in lieu of existing groundwater pumping in the SRGB.
The Settlement Agreement includes the following provisions:
1. Annual Return Water deliveries by Cal-Am to CCSD not to exceed 690 acre-feet/year, at CCSD’s avoided marginal cost of pumping (currently $110/acre-foot). Additional water at an estimated $580/acre-foot.
2. Annual Return Water deliveries by Cal-Am to CSIP for an amount equal to Cal-Am’s Return Water obligation less 690 acre-feet at CSIP’s marginal cost of pumping (currently $102/acre-foot).
3. Cal-Am’s obligations for calculation of the Annual Return Water delivery amounts.
4. Setting of Purchased Water Agreement Term of 30 years.
5. Cal-Am and CCSD responsibilities for water transmission facilities.
OTHER AGENCY INVOLVEMENT:
The Monterey County Water Resources Agency Board of Directors approved this matter on April 25, 2016. County Counsel has assisted the Agency in negotiations among the Parties.
Due to the late receipt of the report, the CAO Budget and Analysis division was not provided adequate time to review for potential fiscal, organizational, policy or other implications to the County of Monterey.
FINANCING:
Since the purchase cost of Return Water is equal to the marginal cost of avoided pumping, no change in Operation and Maintenance cost will occur. Fund 131 will be utilized for the backflow preventer installation cost and connection to Cal-Am’s Delivery Point meter.
Prepared and Approved by:
David E. Chardavoyne, General Manager (831) 755-8906
Attachments:
1. Draft Settlement Agreement on MPWSP Desalination Plant Return Water
2. Return Water Planning Term Sheet
3. MCWRA Executed Board Order