MP Regional Water Authority TAC Meeting

MINUTES MONTEREY PENINSULA WATER AUTHORITY (MPRWA) TECHNICAL ADVISORY COMMITTEE (TAC) Special Meeting 1:30 PM, Tuesday, November 13, 2012 COUNCIL CHAMBER FEW MEMORIAL HALL OF RECORDS MONTEREY, CALIFORNIA Members Present: Burnett, Stoldt, Israel, Narigi, Riedl, Riley Members Absent: None Staff Present: Legal Counsel, Clerk to the Authority CALL TO ORDER ROLL CALL TAC Chair Burnett called the meeting to order at 1:30 p.m. PLEDGE OF ALLEGIANCE PUBLIC COMMENTS Chair Burnett opened the floor to public comments for items not on the agenda and having no requests to speak, closed public comment. AGENDA ITEMS 1. Receive and Discuss Consultants Report from Separation Processes Inc.: Evaluation of Seawater Desalination Projects and Make Recommendations to the MPRWA Authority Directors Chair Burnett opened the item noting the report under discussion is only a draft and any comments or recommendations will be distributed to the Authority Board as well as to the SPI Consultants. He also clarified that any recommendations given to the Board will be regarding the report information and not recommendation of a desalination project. Member Stoldt informed the TAC that the SPI Consultants will be attending the Authority Board meeting on November 14, 2012 to discuss key variables, uncertainties and assumptions. He also indicated this will be an opportunity to give comments and feedback regarding project proponents to be included into the final report. He then directed the discussion to focus on compiling any issues or concerns to be elevated and to collect comments from the public. Chair Burnett suggested the recommendations be broken down into the following categories:  Clarification of questions for the consultants MPRWA TAC Minutes Tuesday, November 13, 2012  Sensitivity analysis of the key variables  Identification of key questions the JPA will need answered before a recommendation can be made to the Authority Board on a January time frame Chair Burnett opened the item to the public. David Armanasco spoke in appreciation of the work from the SPI Consultants for the review of all three projects and wanted to provide the TAC with comments in four areas: source of water supply and quality, O&M costs, schedule, and project risks. He provided a written document to the TAC with expanded comments. Paul Hart representing the Peoples Moss landing project requested additional comparisons be done by SPI Consultants by presuming different circumstances as potential alternatives and to give new costs assessments based on the alternative positions. His recommendations and concerns for the report included the following:  The cost of debt service is different in scenarios of purchase versus lease and may not impact the cost of operation over period but total life of the project.  Too much presumption on the ability of a lease agreement without need of eminent domain. No consideration of large up front capital costs for acquisition of property.  Expense of the intake pipes need to be comparable, it was included in some but not other projects.  Need to equalize to the cost of foot of water to what the public is paying and not the cost to produce. Nadar Agha rejected the report and the assumptions made about the People’s Moss Landing project (PML). He disagreed about the cost assumptions generated by the consultants for the People’s project that they are significantly different than his own cost forecast and said he has successfully built projects never exceeding his cost forecast. He also expressed frustration that the SPI Consultants used outdated numbers, even when provided with updated figures and he also disagreed with the assumption the project cannot meet the necessary deadline. Mr. Agha reminded the TAC that PML has a completed and Environmental Impact Review. Doug Wilhelm expressed concern that Cal Am appears to be competitive in costs, but the report does not include the 99 million dollar surcharge from the rate payers. Director Burnett clarified that the consultants did not look at financial issues, because the JPA did not request the consultants to include the surcharge for the net present value calculation but the issue of the surcharge is important enough that it will be agenized at a future Authority Board meeting. Dale Hekhuis commented about the appropriateness of the proposal and provided written comments to the TAC. He expressed that project management fees are missing from costs estimates and profit contributions would start at $8 million and decline due to assets. He questioned if Cal Am considered contingencies of the slant wells on the impact to the schedule. Sue McCloud questioned if the same discussion will take place again tomorrow night and was disappointed the consultants were not present at this meeting. She questioned energy costs, specifically the opportunity to use methane power from the local landfill and that there was no 2 MPRWA TAC Minutes Tuesday, November 13, 2012 mention of legal actions and how it could delay and increase costs. Ms. McCloud requested expansion on the process of acquiring rights of the water route, specifically an existing pipeline, and questioned when confidential information about the Deep Water Desal (DWD) project would be made public. David Armanasco spoke in response to part of Sue McCloud’s concern about the water route and indicated the DWD project intends to replace the current pipe with a larger pipe and that he expects the confidential information to be made public as soon as this week. Paul Hart challenged the calculations of initial capital costs and indicated the method of calculation was incorrect by dividing per acre feet by the total costs. Safwat Malek spoke in support of Ms. McCloud’s comments requesting SPI to respond in an addendum in addition to the TAC memo prior to the Authority Board meeting. He also questioned why the financial figures for Cal Am's project were drastically different than previously published numbers. Dennis Ing, Chief Financial Officer for Deep Water Desal indicated that they did their best to provide accurate information to the consultants working around confidential information and a short time line. He complimented the SPI Consultant’s staff on the report and acknowledged that the report was a snapshot of the information available at that time. TAC Burnett reiterated the goal of the discussion was to request clarification and gather questions but not to find answers and brought the item back to the TAC for suggestions, corrections, and requests for clarification or questions. Member Narigi requested clarification on the following areas:  Cost of the slant wells vs. rainey wells  Clarification on where all the projects are with relation to the schedule to date  The plants would be running at 98% capacity which is a replenishment plan and not factoring in growth for community vitality.  What level of acre feet production is needed to make the schedule Member Riedl questioned water quality numbers listed in chapter four. Water quality drives costs and suggested the TAC or the Authority BOard make a determination of a standard of source water quality. He also suggested that the report should indicate that water rights were not considered in this evaluation. Mr. Riedl indicated he had other technical concerns and that he will submit additional comments in writing prior to the Authority Board meeting. Member Riley commented that site reviews were apples to apples on site control, but it is an assumption that should be changed or clarified. He also requested clarification for schedule 6- 5, chart 6-1, which allows for an EIR only for the Cal Am project but requires an EIR and EIS for 3 MPRWA TAC Minutes Tuesday, November 13, 2012 the other two projects. Rich Svindland spoke representing the Monterey Peninsula Water Supply project about the project status of test slant wells indicating that intended to have a test slant well installed during the snowy plover absence, but without a complete application with the Coastal Commission, they will have to wait until the next non nesting season (November-March). He also clarified that they intend to return water to the Salinas Valley Basin on any day that the production exceeds the daily water requirement. Member Riley expressed concerned the report is targeting the first year of operation to get a project initiated and that he's not comfortable with the long term implications and making decisions based on short term results will result with being trapped in a bad process in the future. He also indicated that this report will be useful for the JPA if one of the projects fails and urged any additional considerations be included for contingency plan. Member Riedl indicated that the Watermaster Technical Advisory Committee will take up the question of replenishment versus growth at a meeting on November 14, 2012. Chair Burnett gave a brief synopsis of the key assumptions discussed during the meeting and indicated a memo would be developed to present to the Authority Board for the next meeting on November 14, 2012. With no further discussion on the item, Chair Burnett adjourned the meeting. ADJOURNMENT Respectfully Submitted, Approved, Lesley Milton, Committee Clerk President MPRWA 4