January 18, 2012
Monterey Herald, Monterey, California

Cal Am quits desal project

Herald Staff Writer

After five months of unsuccessful mediation, California American Water has officially turned its back on the Regional Desalination Project in favor of a search for a different alternative water supply for the Peninsula.

But questions remain in the aftermath of the ill-fated project that was born and apparently died in private talks, including how the search for an alternative will be conducted and who will be held responsible for the millions of dollars already spent on the $400 million proposal.

On Tuesday, Cal Am announced it would withdraw its support for the project, effectively killing the proposal, after the mediation process ended Monday.

In a news release, Cal Am President Rob MacLean said the firm decided to back out of the desal project when it became clear there would be no resolution emerging out of the mediation, which was sponsored by the state Public Utilities Commission. The mediation, which began in August, was intended to resolve a number of issues, including an alleged conflict of interest involving former county water board member Steve Collins and litigation that resulted in a ruling requiring a new environmental review for the project.

Instead, MacLean said Cal Am and the county agreed to seek potential alternatives that could meet the need for a replacement source of water on the Peninsula, which is facing a state-ordered cutback in pumping from the Carmel River that takes full effect in 2016. He said Marina Coast Water District, a partner in the desal project, has been invited to participate.

"Desalination will be part of the Monterey Peninsula's future water supply, but the Regional Desalination Project will not be the vehicle to deliver it," MacLean said in the release. "A lot of valuable work has been accomplished that will still be applicable to a desalination project that needs to be developed."

While MacLean was not available for comment, Cal Am spokeswoman Catherine Bowie said the firm believes it has the authority to unilaterally withdraw from the project under the terms of the proposal's water purchase agreement.

She said it's time to seek other ways to solve the area's impending water crisis.

"I think there's a general understanding throughout the community that there's limited time for a solution and we needed to move forward," she said. "The main point is we're out of time."

In Cal Am's news release, Supervisor Dave Potter said it's time to get everyone on the Peninsula involved in finding a workable alternative.

"Everyone is committed to finding a water supply solution for the Monterey Peninsula," Potter said. "With mediation ending and the environmental impact report stalled, we have an opportunity to more broadly engage the public and fix the Peninsula's water problem."

Bowie acknowledged there is no plan in place to identify an alternative project capable of meeting the demand for a replacement water source by the state-imposed deadline. But she noted Cal Am had already prepared a study of water supply alternatives that considered nearly a dozen potential projects, all of which included desalination. Bowie said the study, unveiled at an October public forum, "set the parameters" for the discussion. Study of alternatives

The consultant who prepared the study found that a north Marina desal plant similar to the regional proposal, combined with aquifer storage and recovery, was the most cost-effective alternative and the most likely to be finished by the end of 2016.

The consultant recommended Cal Am seek approval for a 10,000-acre-foot desal plant but construct it in phases to allow time to search for other, perhaps more cost-effective, alternatives, such as a groundwater replenishment proposal.

The study absorbed criticism for several of its findings, and some critics called for an independent review of possible alternatives.

In its release, Cal Am said it is set to meet with a PUC judge next week about its bid to proceed with design and construction of its portion of the desal project, including a pipeline and water storage facilities. Cal Am has argued it would need those facilities even if the desal project doesn't proceed because they would be required for any of the potential alternatives in its own study. MacLean said approval would ensure progress on a water supply project while the company "determines its next steps."

Critics have argued the proposed Cal Am facilities would need further review if the rest of the project doesn't proceed.

Any new project would require approval by the county, the PUC and the state Coastal Commission, among others. Bowie said an alternative could be designed and constructed by the state deadline, but the permitting and approval process would be the largest potential obstacle.

Addressing solutions

Neither of Cal Am's project partners, the county Water Resources Agency or Marina Coast Water

District, would say officially the desal project was dead. However, County Counsel Charles McKee said the county has agreed to discuss "potential solutions" with Cal Am, and said the company's actions provided a "time out to take another look" at possible alternatives. Supervisor Jane Parker, a persistent critic of the desal project, said it is uncertain what Cal Am's actions will mean for the Peninsula, but said she hopes it provides an opportunity to reconsider the approach to finding a solution.

"I think this means we can refocus on realistic, affordable solutions for the Peninsula," Parker said, "but there's still a lot of questions about what happens next. I think what's really clear is there needs to be quite a bit of regional cooperation. I think if we recognize the opportunity exists to rely on a suite of solutions and don't try to solve the problem with one big solution, there could be some progress."

In response to Cal Am's announcement, Marina Coast issued a news release late Tuesday strongly reaffirming its commitment to the desal project, arguing that the "urgently needed project can move forward and that all outstanding issues can be resolved promptly and favorably."

General Manager Jim Heitzman said district officials still believe there's a "valid contract" and intends to meet its obligations under the project agreements. Heitzman pointed out the current proposal is the only one that has been approved, and none of the proposed alternatives are guaranteed.

Who will pay?

One of the biggest questions is who will end up paying for the estimated $48 million spent on the desal project at last count, including $33 million by Cal Am, nearly $11 million by Marina Coast and nearly $4 million by the county.

Much of that spending pre-dates the current version of the project. Some of it will not be reimbursed, and some of it involves unpaid work by project manager RMC Water and Environment, which paid Collins $160,000 for work he did on the desal project while a public official. Collins is facing felony conflict of interest charges in connection with that work.

Approved by the PUC in December 2010, the project would have drawn brackish water from county-owned wells north of Marina, converted it to potable water in a desal plant owned by Marina Coast and pumped it to Cal Am's Peninsula customers.

Jim Johnson can be reached at 753-6753 or jjohnson@montereyherald.com.

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