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MINUTES MONTEREY PENINSULA WATER AUTHORITY (MPRWA) TECHNICAL ADVISORY COMMITTEE (TAC) Special Meeting 2:00 PM, Thursday,

January 24, 2013 FEW MEMORIAL HALL OF RECORDS MONTEREY, CALIFORNIA Members Present: Members Absent: Staff Present: CALL TO ORDER ROLL CALL PLEDGE OF ALLEGIANCE PUBLIC COMMENTS Chair Burnett invited public comments for items not on the agenda. David Armanasco spoke to communicate the status of the Deep Water Desal (DWD) project, who filed their application with the State Lands Commission to begin the CEQA process to begin developing an Environmental Impact Report (EIR). They have also been responsive to the California Public Utilities Commission (CPUC) requests to supply information for use as alternative information for the Cal Am Monterey Peninsula Water Supply Project (MPWSP) EIR. He then described how the DWD project will have reduced facility energy costs. The intake facility will bring raw, cold sea water to cool down the data center which will in turn pre-heat the water to proceed to the desal unit. DWD is also in the process of securing a power purchase agreement with the City of Salinas, to purchase directly from a power wholesaler further reducing costs. The data center and desalination facility will be located on the Dynagy property, eliminating the need to pipe water across Elkhorn Slough. Member Reichmuth questioned screenings for marine life and chemical pre treatment abilities. Mr. Armanasco responded that the process includes a screen open intake and conclusions of first study indicated that there was a .007% chance of entrainment or impingement. If there is pre-treatment required, it would happen after the water went through the data center. Interim Executive Director Meurer requested an update of the status of the permitting and the current proposed time line. Mr. Armanasco responded that DWD will not apply for permits until the project has completed the environmental review. Once completed, they will apply for necessary permits from the Coastal Commission. With no further requests to speak, Chair Burnett closed public comment. AGENDA ITEMS Discuss Project Decision Matrix and Provide Recommendation to Authority Action: Discussed and Drafted Recommendation to Authority Directors Burnett, Stoldt, Riedl, Siegfried, Israel, Narigi, Riley None Legal Counsel, Interim Executive Director, Clerk to the Authority

1.

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TAC Chair Burnett introduced the item explaining the purpose of the agenda item and recused himself from decisions made at the TAC today due to his position on the Authority Board. He indicated that the Monterey Peninsula Water Management District was not able to complete the matrix due to time and scheduling constraints therefore only two matrix would be presented to the Authority. The Purpose of the matrix is to illustrate the range of opinions to be a tool to make side by side comparison, with a number of key variables, assumptions and decision points. Chair Burnett acknowledged the task to be ambitious and thanked the TAC members for their effort then answered questions from the TAC. Member Riley questioned the usefulness of the exercise concerned it will reflect more opinion rather than research. Chair Burnett responded that information has changed. Before, the TAC identified questions and the purpose of this exercise is to answer the questions and provide recommendations, with opinions and judgment. Chair Burnett opened the item for public comment. Sue McCloud questioned the status of the People's Moss Landing project asking if information contained in the SPI report was still accurate. Chair Burnett asked if any member of the public was present representing the People's project and could answer the question posed by Ms. McCloud. With no further requests to speak, public comment was closed and Member Stoldt spoke to Ms. McClouds question reporting that PML has been working to pull together a project team because the previous project is gone, and a replacement project does not yet exist. In response to the discussion Chair Burnett indicated the focus today will be on two projects, Cal Am and the DWD project only information about the PML projects viability is questionable and the TAC should only present accurate, verified data to the Authority. Member Riley expressed concern that the Authority is focusing on only one project and not making room for a contingency plan. Legal Counsel Freemen responded that the Authority requested the CPUC to look at all three projects in the environmental review and his question is not what is up for discussion today. The TAC discussed and completed the matrix line by line discussing what the TAC felt was missing or was different than the SPI matrix. The first topic discussed was facility size and TAC questioned if changing the size of Cal Am's project changed parameters of the CEQA process and also discussed replenishment rates of the Seaside Basin and operating levels of the facility. TAC agreed the facility should not run at 98% capacity but the norm should to run at 80% capacity due to regular maintenance, daily operations of back flushing and long term maintenance requirements. Chair Burnett opened the item regarding facility sizing for public comment. Dennis Ing responded that the DWD desalination plant will have a number of trains of reverse osmosis that is equivalent to 2,000 acre feet and will always have a 25% back up ready for demand or maintenance. The 98% operation capacity is how you run your main system, not your total capacity. Doug Wilhelm spoke to demands to change the plant operating capacity indicating it will only increase the cost, but demand will not change and referenced Cal Ams presentation on the price elasticity of demand. Tom Rowley said consumption has been consistent for the last 10 to 15 years and the community has demonstrated voluntary cutbacks on consumption, but has not significantly been reflected in the demand. Eric Sabolsey spoke to the operation of the facility indicating there is a peak capacity that the plant will have. The MPWSP is using those numbers from the critically dry years for the function to ensure that they 2

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have capacity in the critically dry years. On GWR and go no go, our schedule is fluid and may shift. The 2015 no/no go was accurate. With no more requests to speak, Chair Burnett closed public comment and responded that the TAC is not designing the plant but want to ensure that regardless of which option is chosen, the capacity factor is not an issue again in a few years, and that the redundancy is accurate. TAC discussed the different methods of intake and agreed that there are problems with the proposed intake methods and agreed that it is necessary to have modeling over a period of time to determine if there are any long term potential damages. They concluded that this is a policy question and that the State Water Resources Board and The Coastal Commission are determining policies for this issue. Chair Burnett opened the item of intake for public comment. Dennis Ing spoke about the presentation of entrapment and impingement and explained how DWD will use a passive intake system which will reject any organism that comes near it. He explained that with a wedge/wire passive intake system, as long as the flow rate is less than 1/2 foot per second organisms can swim away. There is an abundance of laboratories that has made 10 years of data with organisms and flow rates available. All species are documented from peer reviewed research labs. Additional studies are being done beginning with Tamera Environmental and are 9 months into the study. He closed comment by indicating that open ocean intake was approved in Southern California this week, after 10 years of debate. Nancy Isakson, Salinas Valley Water Coalition questioned the recommendation for intake source and expressed appreciation for addressing Hydrologist Tim Durbin's concerns. She then requested the TAC to look beyond that as there are issues with the shallow aquifer and test wells which need to be monitored for at least 2 years for real world results. She closed by saying it would be in everyone's best interest to look for a source that is outside of the Salinas basin. Chair Burnett closed public comment and continued to the next topic of pretreatment. Member Seigfried shared skepticism about the SPI report on this item of pretreatment as it will change over time unless you have a dynamic situation whens occasional blooms reduce oxygen levesl and will have a constant nitrate source from the Salinas river which feeds blooms. Member Israel indicated it is important to ensure specific chemicals are neutralized so that the water has the ability to be recycled. Member Reichmuth indicated at the Santa Cruz/Soquel Creek project had unanticipated manganese/boron pretreatment needs, which do not pre-treat well. Regardless of the types of wells, pretreatment is not significant. Importance is organisms. TAC agreed that they would support and require a partial second pass. TAC Member Burnett called a recess for 10 minutes at 3:18 p.m, reconvened at 3:28 p.m. and temporarily tabled item one to take up item two. When finished, returned to item one. TAC took up the discussion of economics and discussed from the November to the December report, the Cal Am annualized costs had a huge increase but are unclear if the other projects have commitments for financing. Still unclear if the other two projects have the financial ability to complete the project as well a determination of the final cost of water and acknowledged that many of the details could be flushed out after a project is supported. Interim Director Meurer responded it should be very uncomfortable for the JPA to look at water rates based on hopes vs. a true provable financing plan. The public needs to know the reliability of those cost abilities. Member Stoldt clarified the financial strategies of the DWD and PML projects indicating their intentions for public ownership access to public financing. Mr. Meurer responded about the unknown viability and the fact the lowest price to the consumer cannot be determined as there 3

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are too many variables unknown that affect the price. The TAC agreed to request in writing the ability of Cal Am project have access to SRF Funds. The item was opened for public comment and Dennis Ing spoke about the DWD project being a private venture supported by entrepreneurs with an interest in the region who desire for the water problem solved permanently. DWD has been in operation for 27 months and have paid all of their expenses to date and have not incurred any debt. All money is currently at risk, unlike Cal Am. The project structure is going to be a joint power authority and wants to partner with the public authority to finance the project with municipal bonds, with ways to accomplish with no equity investors. This is a regional project and is trying to solve regional issues with no guarantee of a return, but believe in the science and ability to deliver. Member Riley followed up on a previous comment about no demonstrated ability to finance the project and asked Mr. Ing to respond. Mr. Ing stated that they have demonstrated they have the funds by always being able to meet all costs when they are encountered. TAC then took up the discussion of the Surcharge 2 proposed by Cal Am. TAC agreed that in order to avoid rate shock and to reduce risk that the surcharge 2 be structured such that it goes to low risk parts or phases of the project and Cal Am equity goes to higher risk parts/phases of the project. TAC then took up the item of scheduling and permitting and opened the item for public comment. Dennis Ing indicated that with the DWD facility choice a permit from Monterey County would entail modification of an existing use permit but the County permit is not the primary permit, the Coastal development permit would be. He indicated the time analysis for the DWD project was captured in the SPI report. With no further requests, closed public comment. TAC discussed the timeline of the Cal Am test wells indicating the current timeline includes up to two years with the testing and design and 6 months to flesh out the contentions with up to two years if significant changes with quality and time. The TAC acknowledged that permits are not the problem, but rather the possibility of litigation. TAC moved on to the section regarding technical feasibility and questioned the possibility of being able to produce the quantity of water from slant wells while not harming the aquifer. Concern was expressed that only a fraction of water be returned to the Salinas Basin. It was agreed that open technical questions should include situations such as sea level rise, earthquakes, aquifer replenishment and amount of water that can be returned to the aquifers and basins. TAC then discussed the importance of the Authority endorsing a project and acknowledged that all of the three proposed projects are relatively immature and young in their processes and unlikely that any would meet the cease and desist order. Yet, the current state of project development is currently unimportant to picking the right project and facilitating its development. Two have the potential to finish if they have the full support to facilitate the project. Don freeman identified that the Cal Am project has revealed their hurdles while the other projects have not been as forthcoming therefore it would be difficult to make an equal comparison. The topic of technical feasibility was opened for public comment. A Cal Am representative responded the 2017 proposal does include the test well running for two years. Dennis Ing spoke to the question of triggering NEPA and or CEQA for a lead agency. NEPA may be triggered with either slant wells or brine discharge. If NEPA is triggered who would be the federal agency? TAC responded that State Lands Commission would be the 4

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lead agency for CEQA and the National Marine Sanctuary would be the lead agency for NEPA. TAC moved on to discuss public ownership and governance. On question, Mr. Meurer responded that the Monterey City Council made a statement of policy position to support public ownership of a desalination facility. The policy was not made based on a true analysis. Member Riley spoke to the reasons for favoring public ownership based on the laws that require access to the public information, meetings, and elections. Interim Director Meurer responded that public agencies are supposed to provide for the required services, in ideology. In practical aspects, a manufactured government structure would only go so far. With public ownership it is all there. Public financing is more stable and it is a public agency responsibility to provide these services. Cal am has a bad track record for environmental protection. Public records, access, transparency, etc. There are great public agencies and less, we are getting wrapped around an emotional issue of ownership that will take our eye of the ball of getting water supply and need a non emotional analysis. 2. Discuss and Provide Recommendation of Options for Providing Source Water for Ground Water Replenishment Project Action: Tabled In the respect of time, TAC Chair Burnett postponed item 1 to take up item 2. He invited public comment on the item. Nancy Isakson from the Salinas Valley Water Coalition presented comments from Dave Chardavoyne of the Monterey County Water Resources Agency position on ground water replenishment. A copy of the correspondence was provided to the Authority Clerk. Legal Counsel Freeman spoke to a comment Mrs. Isakson made at the previous meeting regarding the participation of recently appointed Member Dale Huss. Ms. Isakson clarified that she does not have a personal conflict with is participation, but wants the public to have full disclosure of his affiliations. With no further comments on the item, TAC Chair Burnett and the TAC agreed to table the item. ADJOURNMENT

Respectfully Submitted,

Approved,

Lesley Milton, Clerk to the Authority

TAC Chair

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