MPRWA Evaluation of Seawater Desalination Projects Final Report December 2012

Evaluation of Seawater Desalination Projects
Final Report December 2012
prepared for:
Monterey Peninsula Regional Water Authority
by:
Separation Processes, Inc. and Kris Helm Consulting
MONTEREY PENINSULA REGIONAL WATER AUTHORITY
TABLE OF CONTENTS
CONTENTS
EXECUTIVESUMMARY.......................................................................................................................................1 PROJECTSUMMARIES............................................................................................................................................... 1 PROJECTFUNCTION.................................................................................................................................................. 2 PROJECTPERFORMANCE.......................................................................................................................................... 4 ECONOMICS.............................................................................................................................................................. 5 IMPLEMENTATIONCONSIDERATIONS...................................................................................................................... 7 1 2 INTRODUCTION......................................................................................................................................11 PROJECTSUMMARIES............................................................................................................................21 2.1 CALIFORNIAAMERICANWATER(CALAM)............................................................................................................22 2.2 DEEPWATERDESAL(DWD)..............................................................................................................................24 2.3 PEOPLESMOSSLANDING(PML) ........................................................................................................................26 . 3 PROJECTFUNCTION...............................................................................................................................31 3.1 CALIFORNIAAMERICANWATER(CALAM)............................................................................................................31 3.1.1 ProjectPurpose..................................................................................................................................31 3.1.2 CustomersIdentified..........................................................................................................................31 3.1.3 AdequacyofTreatmentApproach.....................................................................................................31 3.1.4 ResidualsHandling.............................................................................................................................34 3.1.5 FeedWaterCharacterization.............................................................................................................34 3.1.6 QualityofProjectInformation...........................................................................................................34 3.1.7 OmissionsorFatalFlaws...................................................................................................................35 3.2 DEEPWATERDESAL(DWD)..............................................................................................................................36 3.2.1 ProjectPurpose..................................................................................................................................36 3.2.2 CustomersIdentified..........................................................................................................................36 3.2.3 AdequacyofTreatmentApproach.....................................................................................................36 3.2.4 ResidualsHandling.............................................................................................................................38 3.2.5 FeedWaterCharacterization.............................................................................................................38 3.2.6 QualityofProjectInformation...........................................................................................................38 3.2.7 OmissionsorFatalFlaws...................................................................................................................39 3.3 PEOPLESMOSSLANDING(PML)........................................................................................................................39 3.3.1 ProjectPurpose..................................................................................................................................39 3.3.2 CustomersIdentified..........................................................................................................................39 3.3.3 AdequacyofTreatmentApproach.....................................................................................................39 3.3.4 ResidualsHandling...........................................................................................................................311 3.3.5 FeedWaterCharacterization...........................................................................................................312 3.3.6 QualityofProjectInformation.........................................................................................................312 3.3.7 OmissionsorFatalFlaws.................................................................................................................312 4 PROJECTEDPERFORMANCE....................................................................................................................41 4.1 CALIFORNIAAMERICANWATER(CALAM)............................................................................................................41 4.1.1 PlantDesignCapacity........................................................................................................................41 4.1.2 TargetedProductWaterQuality .......................................................................................................42 .
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INTRODUCTION
4.1.3 DisinfectionStrategy..........................................................................................................................43 4.2 DEEPWATERDESAL(DWD)..............................................................................................................................44 4.2.1 PlantDesignCapacity........................................................................................................................44 4.2.2 TargetedProductWaterQuality .......................................................................................................44 . 4.2.3 DisinfectionStrategy..........................................................................................................................45 4.3 PEOPLESMOSSLANDING(PML) ........................................................................................................................45 . 4.3.1 PlantDesignCapacity........................................................................................................................45 4.3.2 TargetedProductWaterQuality .......................................................................................................45 . 4.3.3 DisinfectionStrategy..........................................................................................................................46 5 ECONOMICS...........................................................................................................................................51 5.1 CALIFORNIAAMERICANWATER(CALAM)...........................................................................................................55 5.2 DEEPWATERDESAL(DWD)..............................................................................................................................57 5.3 PEOPLESMOSSLANDING(PML) ......................................................................................................................510 . 6 IMPLEMENTATIONCONSIDERATIONS ....................................................................................................61 . 6.1 CALIFORNIAAMERICANWATER(CALAM)............................................................................................................63 6.2 DEEPWATERDESAL(DWD)..............................................................................................................................67 6.3 PEOPLESMOSSLANDING(PML) ........................................................................................................................69 . 6.3.1 AssessmentofImpactsofSeawaterIntake.......................................................................................69 6.3.2 BrineDischarge................................................................................................................................610 7 REFERENCES...........................................................................................................................................71
APPENDIXA....................................................................................................................................................A1
LIST OF TABLES
TABLEES1SUMMARYOFPROPOSEDPRODUCTWATERQUALITY............................................................................................ 4 TABLEES2SUMMARYOFEVALUATEDCAPITALANDOPERATINGCOSTESTIMATES ...................................................................... . 6 TABLE41SUMMARYOFPROJECTEDPRODUCTQUALITYFROMCALAMFACILITY...................................................................43 TABLE42SUMMARYOFPROJECTEDPATHOGENCREDITSFORCALAMPROJECT....................................................................43 TABLE43SUMMARYOFPROJECTEDPRODUCTQUALITYFROMDWDFACILITY......................................................................44 TABLE44SUMMARYOFPROJECTEDPATHOGENCREDITSFORDWDPROJECT........................................................................45 TABLE45SUMMARYOFPROJECTEDPRODUCTQUALITYFROMPMLFACILITY1......................................................................46 TABLE46SUMMARYOFPROJECTEDPATHOGENCREDITSFORPMLPROJECT.........................................................................46 TABLE51SUMMARYOFCHEMICALUNITPRICES..............................................................................................................52 TABLE52SUMMARYOFEVALUATEDCAPITALANDOPERATINGCOSTESTIMATES ...................................................................54 . TABLE53SUMMARYOFCALAMCAPITALCOSTEVALUATION.............................................................................................56 TABLE54SUMMARYOFCALAMO&MCOSTEVALUATION...............................................................................................57 TABLE55SUMMARYOFDWDCAPITALCOSTEVALUATION ...............................................................................................58 . TABLE56SUMMARYOFDWDO&MCOSTEVALUATION..................................................................................................59 TABLE57SUMMARYOFPMLCAPITALCOSTEVALUATION...............................................................................................510 TABLE58SUMMARYOFPMLO&MCOSTEVALUATION.................................................................................................511
LIST OF FIGURES
FIGUREES1PROJECTEDCALAMPROJECTIMPLEMENTATIONSCHEDULE.................................................................................. 8 FIGUREES2PROJECTEDDWDPROJECTIMPLEMENTATIONSCHEDULE..................................................................................... 8 FIGUREES3PROJECTEDPMLPROJECTIMPLEMENTATIONSCHEDULE....................................................................................... 8
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FIGURE21CALAMPROJECTLOCATIONMAP..................................................................................................................23 FIGURE22DWDPROJECTLOCATIONMAP.....................................................................................................................25 FIGURE23PMLPROJECTLOCATIONMAP......................................................................................................................27 FIGURE61CONCEPTUALIMPLEMENTATIONSCHEDULEFORTHECALAMPROJECT .................................................................66 . FIGURE62CALAMPROPOSEDIMPLEMENTATIONSCHEDULE.............................................................................................66 FIGURE63CONCEPTUALIMPLEMENTATIONSCHEDULEFORTHEDWDPROJECT.....................................................................67 FIGURE64DWDPROPOSEDIMPLEMENTATIONSCHEDULE................................................................................................68 FIGURE65CONCEPTUALIMPLEMENTATIONSCHEDULEFORTHEPMLPROJECT.....................................................................610
ABBREVIATIONS AND 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 EIR 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 HDPE High Density Polyethylene JPA Joint Powers Authority
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KHC Kris Helm Consulting lb - pound LF Lineal Foot MCL Maximum Contaminant Level MPRWA Monterey Peninsula Regional Water Authority MRWPCA Monterey Regional Water Pollution Control Agency mgd Million Gallons per Day MF Microfiltration MG Million Gallons MLCP Moss Landing Commercial Park MLPP 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
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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 supplya 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 considerationDeepWater Desal, LLC and the Peoples 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). 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).
Purpose
Production Volume 5.4 mgd or 9.0 mgd

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INTRODUCTION
DeepWater Desal (DWD)

DeepWater Desal, LLC, Dynegy Moss Landing Power Plant, Proponent(s) MFJK Partnership of the Capurro Ranch, PV2 Solar, and Ecomert Technologies Location Capurro Ranch Property, north of /Elkhorn Slough Phase 1 to supply supplemental desal component of the Purpose 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 Peoples Moss Landing Water Desal Project (PML)

Proponent(s) Location 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 Purpose Peninsula regional water supply This project is currently proposed as alternative to the CalAm 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 ocean intake installed coincident with an existing 51-in diameter concrete outfall pipeline owned
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EXECUTIVE SUMMARY
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 flowsCal-Am blending with the existing Monterey Peninsula Regional Water Pollution Control Agencys 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 approachall 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 systemtreating 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 necessaryso 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 DWD 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. DWDs site location north of the Elkhorn Slough is likely to entail complex issues with crossings for all three of their large diameter pipelines (one 48-in and two 36-in). All three proponents were cooperative with our 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 their proposed intake. PML is at a more preliminary level of engineering and planning in comparison.
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INTRODUCTION
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 incrementeither 5,500 AFY or 9,000 AFY. What we found were wide variationswith 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 productionnot 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-Ams proposed partial two-pass system could likely achieve chloride, boron, and total dissolved solids (TDS) consistent with current Carmel 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.
Table ES-1 Summary of Proposed Product Water Quality
Parameter Total Dissolved Solids Chloride Boron pH Calcium Alkalinity Units mg/L mg/L mg/L units mg/L as CaCO3 mg/L as CaCO3 Value 380 60 0.5 8.0 40 40
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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: Uniformity in plant design capacity for the two non-regional approaches; equivalent capacity allocation for the proposed DWD regional project. 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. 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 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-Ams 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-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.
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INTRODUCTION
Table ES-2 - Summary of Evaluated Capital and Operating Cost Estimates

Project Proponent Cost Element Cal-Am 9 kAFY 5.5 kAFY DWD 9 kAFY 5.5 kAFY 9 kAFY PML 5.5 kAFY
CAPITAL COSTS (in Millions 2012 Dollars) Intake/Outfall Facilities Pretreatment & Residuals Handling Desalination System Post-Treatment Distribution Facilities Site Structures Offsite Trenched Pipelines Indirect Costs1 Contingency Allowance (30%) Mitigation Allowance (1%) TOTAL $23.0 $10.6 $22.4 $1.48 $6.14 $11.5 $24.9 $57.5 $47.2 $1.60 $206 $17.7 $7.94 $15.0 $0.88 $5.08 $10.8 $24.9 $50.3 $39.8 $1.30 $174 $-0$11.2 $19.4 $1.48 $3.35 $3.65 $28.3 $54.5 $36.6 $1.20 $160 $-0$7.94 $13.2 $0.88 $3.26 $2.52 $27.3 $47.5 $30.8 $1.00 $134 $-0$20.2 $19.9 $1.66 $0.35 $10.0 $25.1 $67.9 $43.6 $1.50 $190 $-0$13.6 $14.0 $1.07 $0.26 $7.00 $25.1 $62.3 $37.0 $1.20 $161
ANNUAL O&M COSTS (in Millions 2012 Dollars) Energy Chemicals Expendables Other Proponent Expenses O&M Labor Equipment Replacement2 TOTAL $5.38 $0.32 $0.69 -$2.69 $1.50 $10.6 $3.26 $0.19 $0.45 -$2.36 $1.23 $7.49 $3.73 $0.81 $0.78 $1.59 $2.69 $1.01 $10.6 $2.29 $0.49 $0.52 $1.45 $2.36 $0.83 $7.94 $3.98 $0.93 $1.09 -$2.69 $1.16 $9.85 $2.43 $0.57 $0.65 -$2.36 $0.92 $6.93
ANNUAL COST OF WATER (in Millions 2012 Dollars) Capital Recovery3 Total Annual Cost Production Cost of Water ($/AF) $19.1 $29.7 $3,300 $16.2 $23.7 $4,310 $9.25 $19.9 $2,205 $7.75 $15.6 $2,850 $11.0 $20.9 $2,320 $9.37 $16.3 $2,965
1Includes implementation costs at 25%; ROW easement/land costs, mobilization/demobilization at 2%; electrical and I&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.
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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-Ams capital cost is the highest; owing largely to its high intake system cost. PML 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-Ams 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. The overall water production costs diverge considerably in our evaluation, due to the higher cost of capital assigned to Cal-Am vs. DWD and PML; so while the base costs are similar, Cal-Ams 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 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 (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-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.
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Figure ES-1 Projected Cal-Am Project Implementation Schedule
Figure ES-2 Projected DWD Project Implementation Schedule
Figure ES-3 Projected PML Project Implementation Schedule
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INTRODUCTION
1 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 KHC 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 MPRWACarmel-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 Carmel 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 AFY1. Currently identified sources include established rights to Carmel 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, DeepWater 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 KHC. 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 December 2012 Page 1-1
PROJECT SUMMARIES
2 PROJECT SUMMARIES
The tabular summaries provided in this section include information on each of the proponent projects, including: Project name Proponent(s) Location Purpose Production volume Key features Facility map Key information provided to review team 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.
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PROJECT SUMMARIES
2.1
CALIFORNIA AMERICAN WATER (CAL-AM) Monterey Peninsula (MPWSP) Water Supply Project
Project Name Proponent(s) Location Purpose
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).
Production Volume Key Features
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
Key Information Provided
Persons Interviewed/Corresponded With
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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
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PROJECT SUMMARIES
2.2
DEEPWATER DESAL (DWD) DeepWater Desal DeepWater Desal, LLC, Dynegy Moss Landing Power Plant, MFJK Partnership of the Capurro Ranch, PV2 Solar, and Ecomert Technologies Capurro Ranch Property, north of /Elkhorn Slough 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 near Seaside. 10. 36-in brine disposal pipeline to MLPP existing cooling water ocean discharge. 1. TAC response package 2. Response to supplemental questions from SPI and KHC 3. Tenera Environmental, Preliminary Modeling of Potential Impacts from Operation of a Desalination Facility Ocean Intake, August 22, 2012 Dennis Ing, Scott Jackson, Jonathan Dietrich
Project Name Proponent(s)
Location Purpose
Page 2-4
December 2012
PROJECT SUMMARIES
Figure 2-2 DWD Project Location Map
____ Intake
December 2012
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PROJECT SUMMARIES
2.3
PEOPLES MOSS LANDING (PML) The Peoples Moss Landing Water Desal Project DeSal America, LLC composed of Moss Landing Commercial Park, LLC; and Stanley and PatriciaVance 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.
Project Name Proponent(s)
Location Purpose
4.8 mgd or 9.4 mgd 1. Raw seawater supply through an existing intake system drawing from the Moss Landing Harbor. 2. Single-stage, zeolite pressure filtration followed by ultrafiltration (UF) 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. 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. Nader Agha, George Schroeder, Stanley Lueck
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PROJECT SUMMARIES
Figure 2-3 PML Project Location Map
____ Intake
December 2012
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3 PROJECT FUNCTION
The function of each proponent project is evaluated on the following criteria: Project purpose Customers identified Adequacy of treatment approach Residuals handling Feed water characterization Quality of project information 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 3.1.1 CALIFORNIA AMERICAN WATER (CAL-AM) 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 scenarioswith GWR and without GWR3. 3.1.2 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 3
SPI Memorandum, Monterey Desalination Study Initial Scoping and Constraints Analysis, August 30, 2012 Direct Testimony of Richard C. Svindland Before the Public Utilities Commission of the State of California, filed April 23, 2012 December 2012 Page 3-1
PROJECT FUNCTION
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 inoperable4. 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 water4. Eight feed water pipeline alignments are being considered, all of which will be made of HDPE 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 5
RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project Description, April 20, 2012 Cal-Am Response to SPI Questions, October 3, 2012 December 2012
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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 Avoidance of impingement and entrainment of marine life No ocean construction impacts 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 mgd7. 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 manganese8. 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 EIR CEQA work. Cal-Am has indicated that the test period could extend as long as 18-24 months if additional data is required5. 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. 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 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
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 Pankratz, 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. December 2012 Page 3-3
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PROJECT FUNCTION
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. Backwash 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: RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Capital and O&M Cost Estimate Update, April 20, 2012. RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project Description, April 20, 2012. 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:
9
California America Water Company, Coastal Water Project, Final Environmental Impact Report, October 30, 2009. Download Filings for Proceeding A1204019
Trussel Technologies Inc. Technical Memorandum, MRWPCA Outfall Hydraulic Capacity Analysis, April 18, 2012. Page 3-4 December 2012
PROJECT FUNCTION
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). Project Map (April 23, 2012). California American Water Application for Monterey Project (PDFA) California American Water Application for Monterey Project (POS, NOA,PDFA) California American Water Direct Testimony of Keith Israel, including a Technical Memo from Trussell Technologies, MRWPCA Outfall Hydraulic Capacity Analysis, April 18, 2012 California American Water Direct Testimony of Jeffrey T. Linam California American Water Direct Testimony of Eric J. Sabolsice California American Water Direct Testimony of F. Mark Schubert, P.E. California American Water Direct Testimony of David P. Stephenson California American Water Direct Testimony of Richard C. Svindland California American Water Direct Testimony of Kevin Thomas Capital Cost Worksheet O&M Cost Worksheet RBF Memorandum, Implementation Schedule Risk Analysis of Water Supply Alternatives, October 24, 2011 RBF Memorandum, Cost Analysis of Water Supply Alternatives, October 19, 2011
Cal-Am also provided a response to questions from SPI, including the following documents:
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.
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3.2 3.2.1
DEEPWATER DESAL (DWD) 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 (JPA) 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 targets4.9 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. En route to the site, the water would transition through a proprietary warming system owned by Dynegy, increasing its temperature from roughly 10 C up to as high as 34 C. The project site is currently occupied by an active vegetable distribution facility, with two large, refrigerated buildings on-site. The site is currently owned by MFLK Partnership, who are also equity partners in DeepWater Desal LLC. DWD has secured a 34-year ground lease for the site with an option to extend it for two successive 32-year periods. The site area is 8.14-acres; and DWD has secured an option to lease an additional 8-acre parcel adjacent to the site should additional area be required for plant construction. 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
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PROJECT FUNCTION
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.10 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 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 operation11. To address the temperature issue, DWD has proposed warming the supply in proprietary system on the MLPP 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. 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
10 11
DWD Response to SPI Questions, September 12, 2012 Cartier G., Corsin P. - Description of Different Water Intakes for SWRO Plants. IDA World CongressMaspalomas, Gran Canaria Spain October 21-26, 2007 - REF: IDAWC/MP07-185. December 2012 Page 3-7
PROJECT FUNCTION
storage could be obtained. A preliminary site plan 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 approach12. 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 MLPP 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 bay13. 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 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.
12 13
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. December 2012
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A listing of documents provided in addition to the response to the TAC is as follows: Product Water Pipeline Alignment Intake Pipeline Hydraulic Grade Line Draft Design Criteria Tenera Preliminary Intake Assessment Conductivity, Temperature and Turbidity Data May 30 June 12, 2012. Raw Water Characterization Program Memo Capital and O&M Cost Estimate Worksheets Site Layout for Capurro Ranch 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. 3.3 3.3.1 PEOPLES MOSS LANDING (PML) 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 targets4.8 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 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 1968the same site that is now called the Moss Landing Commercial Park (MLCP). The pump station draws from the Moss Landing
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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: Intake pumps and pipeline and outfall pipeline. Up to four 5.0 MG concrete storage tanks. A 12kV, 12,000 amp electrical service along with two 1,000 amp engine generators. Rail transportation terminal. Non-exclusive easements for site access. Non-exclusive use of a 2,100 gpm well supply source. A 5,000 gpd trailer-mounted pilot plant. Up to 20,000 sq. ft. of existing buildings.
Existing infrastructure is in various states of repair as detailed in two site investigations14,15and 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 plain16 and constructed facilities would need to be built in accordance with any ensuing requirements. 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, posttreatment 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.
14 15
Replacement Cost Approaisal Summary Report, prepared by Landmark Realty Analysts, Inc., October 3, 2011. Structural Evaluation, Intake & Outfall Pipelines, Intake Pump Station and Water Storage Reservoirs, The Peoples 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 December 2012
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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 gfd17. 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 200818 . 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 section19. However, portions of the main outfall appear to be currently uncovered; and one section shifted uppossibly as a consequence of the 1989 Loma Prieta earthquake. Many of the diffusers are clogged and covered with marine growth; and from the terminus of the outfall it appears it may be largely filled with sandup to half of the circumference. Consequently a fair amount of rehabilitative work would be required to place the outfall into service, and more detailed assessmentincluding an inspection of the interior of the outfallis warranted.
17 18
Coastal Water Project Pilot Plant Report, May 2010, MWH. 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. December 2012 Page 3-11
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3.3.5
Feed Water Characterization
PML 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 PML 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: Construction Plans: Seawater Outfall Construction Plans: Relocation of Sea Water Intake The Peoples Moss Landing Water Desal Project, Important New Updates, July 2012 Response to SPI Questions, September 4, 2012 and September 27, 2012 Environmental Issues and Constraints Report, SMB Environmental, September 2012 Structural Evaluation, JAMSE Engineering Inc., August 2012. Replacement Cost Appraisal Summary Report, Landmark Realty Analysts, Inc., October 2011. 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.
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4 PROJECTED PERFORMANCE
This section discusses the following performance issues for each project: Plant design capacity 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 Department 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 4.1.1 CALIFORNIA AMERICAN WATER (CAL-AM) 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
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-Ams case, they are proposing redundant process units, so its 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 plants annual production capacity may need to be returned to the basinup to 780 AFY for the 9,000 AFY demand scenario20. This has the effect of increasing the annual 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 CalAms 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 (MCLs) 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 well20. 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/L21. 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.
20 21
RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project Description, April 20, 2012.. Presentation Monterey Peninsula Water Supply Project Presentation to Monterey Co. Water Resources Agency, June 25, 2012. December 2012
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Table 4-1 Summary of Projected Product Quality from Cal-Am Facility

Parameter Total Dissolved Solids Chloride Boron pH Calcium Alkalinity Units mg/L mg/L mg/L units mg/L as CaCO3 mg/L as CaCO3 Value 380 60 0.5 8.0 40 40
4.1.3
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-Ams 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
Parameter CDPH Requirement (Potential Range) Aquifer Filtration Granular Media Filtration RO UV Chlorination TOTAL without Aquifer Filtration Credit & UV TOTAL without UV TOTAL of All Giardia 3-5 1 2.5 2 2 0.5 5 6 6+ 4 5 6+ Crypto 2-4 1 2 2 2 2+ 6+ 6+ 6+ Virus 4-6 2 2
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4.2 4.2.1
DEEPWATER DESAL (DWD) 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. Its 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 CalAm, 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
Parameter Total Dissolved Solids Chloride Boron pH Calcium Alkalinity, as CaCO3 Units mg/L mg/L mg/L units mg/L mg/L Value <500 128 <0.9 7.0 8.0 20 - 50 >55
Due to their proposed warming process, the product water will also likely have a temperature between 29 34 C (84 93 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.
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4.2.3
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 Projected Pathogen Credits for DWD Project
Parameter CDPH Requirement (Potential Range) Granular Media Filtration RO Chlorination TOTAL Giardia 3-5 2.5 2 0.5 5 4 Crypto 2-4 2 2 Virus 4-6 2 2 2+ 6+
4.3 4.3.1
PEOPLES MOSS LANDING (PML) 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 mgdroughly 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.
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Table 4-5 Summary of Projected Product Quality from PML Facility1

Parameter Total Dissolved Solids Chloride Boron pH Calcium Alkalinity, as CaCO3 Units mg/L mg/L mg/L units mg/L mg/L Value 225 131 0.6 6.6 1 1
1Listed quality is projected permeate from the RO system, prior to final stabilization and pH adjustment.
4.3.3
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 Projected Pathogen Credits for PML Project
Parameter CDPH Requirement (Potential Range) Granular Media Filtration MF/UF RO Chlorination TOTAL Giardia 3-5 2.5 4 2 0.5 6+ 6+ Crypto 2-4 2 4 2 Virus 4-6 2 2 2 2+ 6+
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5 ECONOMICS
In our original project scoping technical memorandum2 we recommended the following criteria to evaluate the candidate projects on an equivalent basis: Uniformity in plant design capacity for the two non-regional approaches; equivalent capacity allocation for the proposed DWD regional project. 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. 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 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-Ams 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. 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: 1. 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
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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, weve 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 Facilitiesincludes 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 CalAm 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
Chemical Name Sodium Bisulfite Sodium Hypochlorite Sodium Hydroxide Lime (Calcite) Carbon Dioxide Scale Inhibitor (antiscalant) Sulfuric Acid Ferric Chloride Corrosion Inhibitor Unit Price $0.45/lb $1.12/lb $0.20/lb $0.17/lb $0.22/lb $1.63/lb $0.15/lb $0.40/lb $0.80/lb
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The rates were primarily based on Cal-Ams response to SPIs questions, though we did use the DWD unit prices for sodium bisulfite. Cal-Ams listed price for sodium bisulfite ($2.70/lb) 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 categoriesEnergy, 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 MF/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.
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Table 5-2 Summary of Evaluated Capital and Operating Cost Estimates

Project Proponent Cost Element Cal-Am 9 kAFY 5.5 kAFY DWD 9 kAFY 5.5 kAFY 9 kAFY PML 5.5 kAFY
CAPITAL COSTS (in Millions 2012 Dollars) Intake/Outfall Facilities Pretreatment & Residuals Handling Desalination System Post-Treatment Distribution Facilities Site Structures Offsite Trenched Pipelines Indirect Costs1 Contingency Allowance (30%) Mitigation Allowance (1%) TOTAL $23.0 $10.6 $22.4 $1.48 $6.14 $11.5 $24.9 $57.5 $47.2 $1.60 $206 $17.7 $7.94 $15.0 $0.88 $5.08 $10.8 $24.9 $50.3 $39.8 $1.30 $174 $-0$11.2 $19.4 $1.48 $3.35 $3.65 $28.3 $54.5 $36.6 $1.20 $160 $-0$7.94 $13.2 $0.88 $3.26 $2.52 $27.3 $47.5 $30.8 $1.00 $134 $-0$20.2 $19.9 $1.66 $0.35 $10.0 $25.1 $67.9 $43.6 $1.50 $190 $-0$13.6 $14.0 $1.07 $0.26 $7.00 $25.1 $62.3 $37.0 $1.20 $161
ANNUAL O&M COSTS (in Millions 2012 Dollars) Energy Chemicals Expendables Other Proponent Expenses O&M Labor Equipment Replacement2 TOTAL $5.38 $0.32 $0.69 -$2.69 $1.50 $10.6 $3.26 $0.19 $0.45 -$2.36 $1.23 $7.49 $3.73 $0.81 $0.78 $1.59 $2.69 $1.01 $10.6 $2.29 $0.49 $0.52 $1.45 $2.36 $0.83 $7.94 $3.98 $0.93 $1.09 -$2.69 $1.16 $9.85 $2.43 $0.57 $0.65 -$2.36 $0.92 $6.93
ANNUAL COST OF WATER (in Millions 2012 Dollars) Capital Recovery3 Total Annual Cost Production Cost of Water ($/AF) $19.1 $29.7 $3,300 $16.2 $23.7 $4,310 $9.25 $19.9 $2,205 $7.75 $15.7 $2,850 $11.0 $20.9 $2,320 $9.37 $16.3 $2,965
1Includes implementation costs at 25%; ROW easement/land costs, mobilization/demobilization at 2%; electrical and I&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.
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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 PML. 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%)]}/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-Ams proposed costs for components of their proposed intake and outfall systems. The slant well installation cost is in line with estimates weve 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 agreementbut 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.
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Table 5-3 Summary of Cal-Am Capital Cost Evaluation

Cost Element Intake/Outfall Facilities Pretreatment & Residuals Handling Desalination System Post-Treatment Distribution Facilities Site Structures Offsite Trenched Pipelines System Subtotal Plant Facilities (PF) Subtotal2 Indirect Costs3 Implementation Costs (25% of PF) ROW, Easement and Land Costs Mobilization/Demobilization (2% of PF) Electrical, I&C Systems (18% of PF) Engineering/Startup (15% of PF) Additional Proponent Prescribed Costs Subtotal4 Contingency Allowance (30%)3 Mitigation Allowance (1%)3 TOTAL
1 All costs are presented in millions of 2012 dollars. 2 Plant facilities costs include the System Subtotal, less off site trenched pipelines. 3
Cal-Am1 9 kAFY $23.0 $9.71 $27.9 $1.25 $6.14 $11.5 $24.9 $104 $79.5 $26.4 $6.20 $1.44 $15.4 $10.8 --0$164 $41.2 $1.60 $207 5.5 kAFY $17.7 $8.52 $19.2 $1.09 $5.08 $10.8 $24.9 $87.3 $62.4 $26.4 $5.20 $1.21 $12.9 $9.03 -0$142 $35.5 $1.40 $179
Evaluated1 9 kAFY $23.0 $10.6 $22.4 $1.48 $6.14 $11.5 $24.9 $100 $75.1 $25.0 $6.20 $1.50 $13.5 $11.3 -0$158 $47.2 $1.60 $206 5.5 kAFY $17.7 $7.94 $15.0 $0.88 $5.08 $10.8 $24.9 $82.3 $57.4 $25.0 $5.20 $1.15 $10.3 $8.62 -0$133 $39.8 $1.30 $174
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.
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Table 5-4 Summary of Cal-Am O&M Cost Evaluation

Cost Element Energy Chemicals Expendables Other Operations & Maintenance Labor Equipment Replacement (1.5% of PF) TOTAL
1
Cal-Am1 9 kAFY $6.11 $0.63 $0.72 $2.69 $1.61 $11.8 5.5 kAFY $3.73 $0.39 $0.49 $2.36 $1.25 $8.22
Evaluated1 9 kAFY $5.38 $0.32 $0.69 $2.69 $1.50 $10.6 5.5 kAFY $3.26 $0.19 $0.45 $2.36 $1.23 $7.49
All costs are presented in millions of 2012 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-Ams projected O&M cost is among the highest of the estimates for the three proponent projectsa 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/kW-hr, annual energy cost in our estimates would drop to $3.28 million/$2.00 million under each capacity alternative. 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 5-5.
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Table 5-5 Summary of DWD Capital Cost Evaluation

Cost Element Intake/Outfall Facilities Pretreatment & Residuals Handling Desalination System Post-Treatment Distribution Facilities Site Structures Offsite Trenched Pipelines System Subtotal Plant Facilities (PF) Subtotal2 Indirect Costs3 Implementation Costs (25% of PF) ROW, Easement and Land Costs Mobilization/Demobilization (2% of PF) Electrical, I&C Systems (18% of PF) Engineering/Startup (15% of PF) Additional Proponent Prescribed Costs Subtotal4 Contingency Allowance (30%)3 Mitigation Allowance (1%)3 TOTAL
1 All costs are presented in millions of 2012 dollars. 2 Plant facilities costs include the System Subtotal, less off site trenched pipelines. 3
DWD1 9 kAFY $-0$16.7 $17.2 $2.41 $4.96 $4.13 $33.9 $79.3 $45.4 $13.5 -0$0.77 $6.18 $9.27 $18.3 $127 $9.27 -0$136 5.5 kAFY $-0$11.6 $11.5 $1.57 $3.32 $2.63 $33.1 $63.7 $30.6 $10.3 -0$0.47 $3.77 $5.65 $15.1 $99.0 $5.65 -0$105
Evaluated1 9 kAFY $-0$11.2 $19.4 $1.48 $3.35 $3.65 $28.3 $67.4 $39.1 $16.9 $5.68 $0.78 $7.04 $5.87 $18.3 $122 $36.6 $1.20 $160 5.5 kAFY $-0$7.94 $13.2 $0.88 $3.26 $2.52 $27.3 $55.1 $27.8 $16.9 $5.68 $0.56 $5.01 $4.18 $15.1 $102 $30.8 $1.00 $134
Listed percent-cost factors apply only to the SPI 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 pass RO system to their facility. We also increased cost of the intake and other trenched offsite pipelines to account for tunneling beneath the Elkhorn Slough at $1,500/LF. Crossing the slough 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. 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
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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 to the Capurro Ranch 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 5-6.
Table 5-6 Summary of DWD O&M Cost Evaluation
Cost Element Energy Chemicals Expendables Other Other Proponent Expenses Operations & Maintenance Labor Equipment Replacement (1.5% of PF) TOTAL
1 All costs are presented in millions of 2012 dollars.
DWD1 9 kAFY $2.68 $0.47 $1.31 $1.59 $2.36 $0.93 $9.34 5.5 kAFY $1.62 $0.28 $0.89 $1.45 $1.43 $0.64 $6.31
Evaluated1 9 kAFY $3.73 $0.81 $1.02 $1.59 $2.69 $1.01 $10.6 5.5 kAFY $2.29 $0.49 $0.68 $1.45 $2.36 $0.83 $7.94
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.
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ECONOMICS
5.3
PEOPLES MOSS LANDING (PML)
The results of our capital cost evaluation of the PML project are presented in Table 5-7.
Table 5-7 Summary of PML Capital Cost Evaluation
Cost Element Intake/Outfall Facilities Pretreatment & Residuals Handling2 Desalination System2 Post-Treatment2 Distribution Facilities Site Structures Offsite Trenched Pipelines System Subtotal Plant Facilities (PF) Subtotal3 Indirect Costs4 Implementation Costs (25% of PF) ROW, Easement and Land Costs Mobilization/Demobilization (2% of PF) Electrical, I&C Systems (18% of PF) Engineering/Startup (15% of PF) Additional Proponent Prescribed Costs Subtotal5 Contingency Allowance (30%)4 Mitigation Allowance (1%)4 TOTAL
1 All costs are presented in millions of 2012 dollars. 2 PML supplied costs for Pretreatment/Residuals Handling, Desalination System, and Post-Treatment were provided as a single lump sum and are
PML1 9 kAFY $-0See Note 2 $56.0 See Note 2 $-0$10.0 $25.0 $91.0 $66.0 $42.0 See Note 4 5.5 kAFY $-0See Note 2 $28.0 See Note 2 $-0$7.00 $25.0 $60.0 $35.0 $21.0 See Note 4
Evaluated1 9 kAFY $-0$20.2 $19.9 $1.66 $0.35 $10.0 $25.1 $77.2 $52.1 $19.3 $30.2 $1.04 $9.38 $7.82 $0.20 $145 $43.6 $1.50 $190 5.5 kAFY $-0$13.6 $14.0 $1.07 $0.26 $7.00 $25.1 $61.0 $35.9 $19.3 $30.2 $0.72 $6.47 $5.39 $0.20 $123 $37.0 $1.20 $161
$133 See Note 4 -0$133
$81.0 See Note 4 -0$81.0
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 assumed9.4 mgd for PML 8.2 mgd in our estimate.
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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. PML 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 PML 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 5-8.
Table 5-8 Summary of PML O&M Cost Evaluation
Cost Element Energy Chemicals Expendables Other Operations & Maintenance Labor Equipment Replacement (1.5% of PF) TOTAL
1 All costs presented in millions of 2012 dollars
PML1 9 kAFY $4.46 $1.32 $0.79 $0.94 $1.33 $8.84 5.5 kAFY $2.23 $0.66 $0.39 $0.94 $0.81 $5.03
Evaluated1 9 kAFY $3.98 $0.93 $1.09 $2.69 $1.16 $9.85 5.5 kAFY $2.43 $0.57 $0.65 $2.36 $0.92 $6.93
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 PMLs projected energy use is higher; their lower cost of electricity results in a lower annual cost.
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 EIR22 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 EIR 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 EIR 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. Approvals related to intake of seawater 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 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 (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.
22
California American Water Company, Coastal Water Project, Final Environmental Impact Report, October 30, 2009 December 2012 Page 6-1
The prior EIR 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 EIR 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 MLPP 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: The Coastal Commission will consider how effectively the project will protect and enhance the marine environment 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. 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
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potential cumulative impacts of projects. Mitigation/enhancement strategies should be coordinated and piecemeal approvals avoided. 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: 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. Comparison/evaluation of environmental impacts to the marine environment and the mitigation strategies should include consideration of future projects and cumulative impacts. Public stewardship and oversight should be detailed prior to review by the Coastal Commission.
6.1
CALIFORNIA AMERICAN 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 CalAm project prior to the CPUCs hearing testimony on the proposed CPCN. Hearings will be concluded prior to the issuance of the Draft EIR. The Final EIR 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 EIR, the CPUC found that it was not in the publics 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
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legal approvals necessary for the project to succeed. Thus there is something of a conundrum for the MPRWA--the CPUCs legal authority and sophistication to act as a lead agency for CEQA creates a schedule advantage. Moreover, the simplicity of the commercial agreements when CalAm 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
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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 NPDES 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 Commissions 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.
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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. We intend to more fully address these 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 fully analyzed in an update of this report in January 2013.
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6.2
DEEPWATER DESAL (DWD)
DWD presented a schedule identifying their major milestones for project implementation. The schedule presented and the discussion of permitting by the DWD team displays a sophisticated understanding of the likely process and pitfalls associated with completing environmental review and obtaining major permits for the proposed desalination project. The schedule presented would presume that the major permits (last being the Coastal Development Permit) would be issued about the middle of the third quarter of 2013. This is based upon a schedule that is much more optimistic than the generic schedule we developed as shown on Figure 6-3.
Figure 6-3 - Conceptual Implementation Schedule for the DWD Project
The schedule above represents a delay in project implementation of more than 34 months compared to the schedule developed by DWD. This major difference is examined below. DWD has suggested that an Environmental Checklist and Applicants Environmental Assessment (EA) are very nearly completed. Based upon DWDs demonstrated understanding of the process for environmental review of the project, the Consultant has accepted this 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 EIR/EIS and the adjustment of the project analyses would take much longer. In the above schedule the Notice of Determination (NOD) for the EIR/EIS would take place approximately 3 months later than the NOD issued by the CPUC for the Cal-Am project which is based upon a Subsequent EIR process. The proposed schedule for a new EIR/EIS is comparable to the schedule adopted by the CPUC. Our schedule also adds four months for the issuance of a CPCN for CalAms participation in the project. It is possible that this process could run concurrent with other processes to obtain major permits. But for conservatism this is shown as a critical path activity. The schedule presumes a 12 month process for obtaining Jurisdictional Permits for facilities which are impacting the Elkhorn Slough. The process to obtain Section 404 permits from the U.S. Army Corps of Engineers would take place after issuance of a Notice of Determination for the EIS. A 404 permit appears to be required for construction of new pipelines crossing the Elkhorn Slough to connect the desalination plant to the intake and discharge facilities of the Moss Landing Power Plant and to convey product water from the desalination plant to the
CalAm system. It is quite speculative to assess how long that process would actually take. The Corps would consult with U.S. EPA and EPA would likely take some time to review the project given both the nature of temporary construction impacts and due to potential concerns regarding indirect impacts of the project upon the Elkhorn Slough. The 12-month period for issuance of this major permit is based upon a presumption of some controversy for the project and a presumption that the Elkhorn Slough is a wetlands area of national significance. Our schedule further presumes that the issuance of NPDES permits for the intake and discharge would follow the issuance of Jurisdictional Permits. This is based upon an assumption that the RWQCB would not review the permits until final approvals had been given for all construction which affected the intake and discharge. Thus, permits to construct the intake and brine line would have to be in hand prior to conducting the administrative process for issuance of NPDES permits. The RWQCB process for issuance of permits has proven to be an administrative process surrounded by controversy. Thus it is quite speculative to assess a time frame for issuance of these permits. The schedule includes six months for the issuance of a Coastal Development Permit by the California Coastal Commission. The Coastal Commission would consider this permit only after 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 Carlsbad, California took many years following certification of environmental documentation. The assumption of six months for this process is based upon an assumption that there would be some contention of facts during the administrative process to issue this permit but that the prior extensive review would have resolved these issues. Nonetheless the time period for issuance of this permit is highly speculative. DWD provided an updated schedule for their project in response to our request. It is shown below in Figure 6-4.
Figure 6-4 DWD Proposed Implementation Schedule
From their proposed schedule, we note the following: The DWD updated schedule has eliminated the time period for the issuance of jurisdictional permits for pipelines crossing the Elkhorn Slough. It is intended that an update to this report issued in January would more fully analyze the effects upon development schedule of the relocation of the project. However, DWDs decision to re-locate the project south of the Slough greatly simplifies the permitting by
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eliminating this potentially controversial permit and would undoubtedly shorten the permitting schedule for the project. DWD has also estimated much shorter time duration for CEQA/NEPA compliance 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. DWD has also estimated a much shorter period for design and construction. We continue to present a period for design and construction which is longer than estimated by DWD and is consistent with delivery via bid to a design-build contractor who would manage design, construction and equipment procurement.
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 apparently shorten substantially. Taken together with the potential delays in the Cal-Am project, it is difficult to discern a substantial difference in schedule between the two projects. 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 projects proposed use of seawater, PML has proffered that as a matter of law, the proposed desalination projects 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 projects use of seawater could have no adverse impact upon the environment. In the schedule below, we have taken a different view and presumed that the projects 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
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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 PML 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 projects 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 R3-20090002, 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. 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
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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.
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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. Pankratz, 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/MP07185. 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 Peoples 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.
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REFERENCES
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.
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APPENDIX A
APPENDIX A RESPONSES TO COMMENTS ON NOVEMBER DRAFT REPORT
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MPRWAEVALUATIONOFSEAWATERDESALINATIONPROJECTS November2012DraftReport ReviewCommentsandResponses

DRAFT REPORT
No.
Comment By
Page No.
NA
Date of Comment
Comments
Response/Action
DeepWater Desal, LLC
NA
NA
The three proposed projects offer differing sources and methods of securing source seawater for 11/13/2012 desalination - marine well water, shallow harbor water, and deep ocean water. Each carries its respective set of risks with regard to quality, source supply, reliability, and schedule. DWD is proposing a conventional screened, low velocity, open-ocean intake located at depth below the photic zone to secure a reliable supply of high quality source water for the desalination plant. Our research shows that the deep water intake location ensures stable high quality (low turbidity) raw water along with an insignificant risk of impingement and entrainment of living organisms. Preliminary tests 11/13/2012 conducted so far confirm our observations, and DWD is presently conducting extensive on-going water quality monitoring and oceanographic studies collecting data which we expect to further confirm these findings. With respect to successful construction and reliability of a deep water intake, there is effectively zero net technical risk in the location being proposed .. l"his method of open water extraction of source water for RO desalination plants is used for more than 98% of the desalination plants currently in operation worldwide. By contrast, Cal Am appears to be proposing a largely unproven alternative intake method using beach located slant wells to extract source water. This method requires a unique set of conditions to exist for serious consideration of this method as a reliable long-term supply of raw water. Slant wells for source water extraction are entirely dependent on site-specific geological conditions. Therefore, a thorough 11/13/2012 knowledge of conditions is necessary including computer modeling, test boreholes, pump testing, and pilot testing. Environmental concerns regarding the impact of a large well field in the Monterey Bay Marine Sanctuary can be expected, and cannot be adequately addressed by a single test well. Experience elsewhere suggests that determination of the suitability of any one site can consume years of research and testing prior to consideration for implementation, if at all feasible.
Agreed. We have accounted for this in our evaluation. We do not agree that the proposed screened open intake carries a significant advantage at this stage of project development to warrant placing it above other alternatives. The necessary marine studies are not complete, so presupposing results is by definition speculative. Open intakes are not preferred by State regulators at present, and only considered for approval when a sub-surface alternative has been ruled out. It therefore presents a comparatively high regulatory threshold. Finally, the installation of the proposed intake pipeline is not without risk--it will entail construction activities in sensitive habitat that could prove controversial. Cal Am has employed competent design professionals in establishing the proposed subsurface intake wells, including Dennis Williams of Geoscience, Inc. Dr. Williams investigated and designed the successful slant demonstration well in Dana Point, California, which has operated well throughout its 2-year operating period, following predictable capacity trends. It is our opinion that Cal Am and its engineering team are engaged in a conservative, deliberative design approach consistent with a successful outcome.
NA
NA
NA
In addition, test wells for the Cal Am project have not yet been permitted, constructed or operated to demonstrate the feasibility of this approach for source water extraction. Nor can the potential impact on existing aquifer withdrawal rates and quality be accurately estimated until the full-scale system is actually operational; which could cause delays in operation if additional treatment components are Cal Am's schedule for installation of the proposed test well is being needed or plant capacities change. The timeline to permit, construct and adequately test slant well 11/13/2012 technology at the Cal Am site may likely consume a minimum of 12 to 16 months (versus the 6 months adjusted based on revised information. The impacts of this change will be addressed in the supplemental report schduled for January 2013. estimated by Cal Am and included in the SPI report, reference Figure 6-1 ). If the test well is not successful after testing, significant schedule impacts would result, and an alternative source water extraction method will have to then be developed, permitted and constructed, further delaying the schedule. We have reviewed the previous pilot work conducted at MLPP and The People's Moss Landing project proposes to extract source water from the Moss Landing Harbor. disagree with the characterization that it was "thwarted" by water quality Again, experience confirms that harbor water is of extremely poor and variable quality and will require, issues. The study evaluated UF pretreatment and found it successful. PML at a minimum, additional pretreatment process steps to reliably produce feedwater to the RO is proposing two-stage pretreatment incorporating granular media filters membrane that meet the SWRO membrane specifications. The first failed desalination project at Moss followed by UF. We consider this approach consistent with the previous 11/13/2012 Landing in 2006 attempted to use the Moss Landing Harbor water but had its pilot testing thwarted by work and adequately conservative. They have further proposed to conduct source water quality issues. Until the proposed pretreatment is extensively pilot tested, it is not possible a 12-month pilot program (included in their schedule) to validate the overall to finalize either the design or the cost of the proposed project. Pilot testing for pretreatment of highly process design. The costs for their pretreatment system as proposed are contaminated source waters would typically require 12-months to capture seasonal effects on the included in our evaluation, along with the schedule impacts of their pilot proposed process. program DWD respectfully submits that the potential cost, risk and schedule impacts of the three candidate methods of source water extraction are not equivalent. Cal Am's proposed slant well alternative intake clearly offers the greatest risk as there is only one successfully operating, large capacity, i.e. (greater than 5 mgd) SWRO drinking water facility utilizing slant well technology anywhere in the world (Oman 11/13/2012 Sur) of which we are aware. The Sur plant takes advantage of meeting all site-specific requirements See above response regarding the slant well issue. supporting beach wells; and was built after 3+ years of testing. to prove this was possible with the support of extensive computer modeling and field testing. The 21 mgd facility requires 32 wells and the well field consumes more than 12 acres. The People's project has the next highest risk associated with the design and operation of a pretreatment system that can reliably treat the very poor quality harbor source water to the very high standards required by SWRO membrane. This risk can only be mitigated by extensive pilot testing of 11/13/2012 duration of at least 12-months to account for seasonal water quality changes and for accurate source water characterization; impact on the proposed pretreatment processes, and removal due to contaminants such as oil and grease and harmful algal blooms.
NA
The PML project and our evaluation includes the recommended measures.
Page1of13
MPRWA.DraftReport.ReviewComments

DRAFT REPORT
No.
Comment By
Page No.
Date of Comment
Comments
Response/Action
NA
All three proposed projects have proposed reverse osmosis as the desalination process and the 0 & M costs associated for each project should be roughly equivalent so far as the RO system is concerned. However, both the Cal Am and Peoples projects contain process equipment that is not required for the DWD project. Cal Am has the added 0 & M costs associated with its slant well field and People's has 11/13/2012 the added costs associated with its additional pretreatment steps (ultrafiltration). Yet, the SPI report has assigned the highest 0 & M cost to the DWD project. Intuitively, this does not seem to be a technically sound conclusion. However, without reviewing the 0 & M cost work-up prepared by SPI we cannot be more specific in ascertaining how SPI arrived at this conclusion. DWD would appreciate the opportunity to review SPI's cost evaluation worksheet to assess whether any incorrect assumptions may have been used in the evaluation. The most notable difference is the inclusion of a row labeled "Other Proponent Expenses" only to the DWD project. The Cal Am and PML projects have no costs identified in this row, but SPI assigned a number from DWD's input that is duplicated in other costs identified as Chemicals and O&M Labor. Our submission clearly identified what was in our costs. We know from our own analysis of the Cal Am and PML projects that they have similar "Other Proponent Expenses". The figures provided for Chemicals is significantly higher than Cal Am while we included chemicals in our "Expendables" category. We clearly identified "O&M Labor'' in our submission sized for the plant and design characteristics. As a result, the 0 & M Costs were overstated by $2.94 million for the 9kAFY plant and overstated by $2.78 million for the 5.5kAFY sized plant. We are inserting Table ES-2 from the SPI report with DWD's corrected numbers below eliminating the duplicated costs and overstated energy costs.
Based on subsequent correspondence between DWD and SPI, we feel we have traced the source of the discrepancy primarily to the line item listed as "Other Proponent Expenses", which we failed to fully understand from the DWD supplied costs originally. The quantity listed in the draft report overlaps with O&M labor estimate included in our cost evaluation. The O&M costs will be revised in the final report to reflect the new information.
NA
11/13/2012
See response above.
10
NA
Schedule forecasting is by nature speculative. However, we have noted that Figure 6-1 -Conceptual Implementation Schedule for the Cal Am Project forecasts the slant well test program will be completed in 9-months commencing 2"d quarter of 2013; and the generic schedule proposed by SPI contains the following condition " ... presumes no delays to the design and construction of the desalination plant based upon development of the intake systems." (Ref. page 57). We sincerely question whether this assumption is reasonable given the uncertainty of permitting, construction and the required test period duration discussed above. The only experience with large capacity slant wells in California is an 11/13/2012 ongoing slant well test program at Doheny Beach in southern California being conducted for the South Orange Coastal Ocean Desalination Project that commenced in 2005 and is not scheduled to conclude until 2013. It would be helpful if SPI would share the rationale and basis for its stated assumption. It should also be noted that the Cal Am schedule would be substantially impacted should the test program not be ultimately successful, which would entail going to an entirely new method for source water extraction. We believe that it is appropriate to reflect this risk element in the evaluation, which in our view is substantial.
We will adjust Cal Am's schedule for the test well program according to new information received in a supplemental report due in January 2013. Cal Am's engineering team is actively engaged in the design and proposed construction sequence for the test wells, and we find their schedule credible from an engineering and construction perspective. Permitting concerns as stated, speculative--but we do note a preference of State regulators for subsurface intakes at present which could smooth their path to approval.
Page2of13

DRAFT REPORT
No.
Comment By
Page No.
Date of Comment
Comments
With respect to the Conceptual Implementation Schedule for the DWD Project, Figure 6-2, we note that the schedule listed by SPI is substantially longer than we forecast. There are two tasks items that we believe should be revised: Task Item 6. Desai Plant Preliminary Design - DWD can execute preliminary design concurrently with the prior task items. Unlike either the Cal Am or the Peoples projects, DWD can accurately determine its design source water quality (and is presently collecting the necessary data needed with instruments deployed in the ocean off Moss landing and regular water sampling). Cal Am cannot characterize its design feedwater until the completion of the slant well test program. Although Cal Am has tried to anticipate the raw water quality and incorporated additional pretreatment components to possibly treat the feed water, only an analysis of the feed water from the actual tested in-field conditions will direct the extent and associated capital and operational cost impact this will have on the plant. Likewise, the Peoples project must first complete its 12-month pilot testing for similar reasons. Task Item 3. Jurisdictional Permits -As noted in the report, DWD has previously been barred from disclosing certain information related to its project due to a binding non-disclosure agreement. We are pleased to now be able to disclose, that DWD is currently engaged in exclusive negotiations for a building south of Elkhorn Slough as an alternative location for the seawater reverse osmosis plant portion the project. This will result in a reduction of capital arid aperating costs and an acceleration of the schedule relative to the Jurisdictional Permits as it will not be necessary route piping that crosses the Elkhorn Slough. While we acknowledge the Slough does have logistical challenges, this alternative effectively eliminates the 12-month schedule item associated with such Jurisdictional permitting. The associated costs savings are $5.5 million in CapEx for the 9kAFY plant size and $2.7 million for the 5.5kAFY plant size. Additionally, the annual 0 & M Costs are lower by $1 07/AFY for a total cost of $1 ,91 0/AFY for the 9kAFY plant and $2,292/AFY for the 5.5kAFY sized plant.
Response/Action
11
NA
11/13/2012
The proponent's updated schedule was solicited since the original draft and has been presented in the report. It has not been fully analyzed but neither is it fully accepted. With respect to Task 3, text has been added to the report to note that a relocation of the project as indicated would substantially lessen the project schedule duration. However, this has not been fully analyzed since this information came to light so late. With respect to Task 6, proponents have indicated a tremendous schedule advantage in all phases of design and construction compared to the generic schedule presented by the Consultants. Both points of view are presented in the report.
12
NA
Because of the critical nature the desalination plant and the necessity to meet the cease and desist order deadline, we respectfully submit that the DWD project offers the lowest risk of significant changes in cost and schedule. Because the DWD project relies on a conventional intake for the supply of high quality source water for desalination, the risk elements for the DWD project are limited to regulatory We believe the advantages cited are excessively speculative given the review and permitting. While both the Cal Am and Peoples project are also subject to regulatory and 11/13/2012 present state of project development; and do not warrant a described permitting risk, they have added significant, material technical risk as well. In the case of Cal Am, the preference in our evaluation. risk associated with relying on a novel and largely unproven and site specific method of source water extraction; and in the case of the Peoples project, the challenge of reliably producing high quality RO feedwater from a very contaminated and highly variable source water. Single pass RO system proposed by DWD and PML-while Cal Am partial double or two pass ystemwhat are advantages/disadvantages and what is cost factor for single vs double? All three projects would supply water into the Cal Am distribution system to integrate with existing supplies. For an apples to apples comparison, we saw it as necessary to compare the projects on the basis of achieving a consistent quality of product water. Single and partial-double pass RO system would produce markedly different qualities of product water--so we performed our evaluation on the basis of all projected incorporating a partial second pass RO system. It should be noted that this was in an effort to provide a balanced evaluation of the projects. Actual facility construction could proceed on either basis, subject to agreement of interested parties and State regulators.
13
Sue McCloud
NA
11/13/2012
14
Sue McCloud
ES-7
15
Sue McCloud
NA
PML has included $3.0M in their cost estimates to provide upgrades to their existing intake and outfall facilities. This, in concert with the 30% overall cost contingency included in our estimates is sufficient to account for potential costs at this stage. Does energy cost use MRWMD power-also green aspect if this energy generated from landfill methane Energy costs were supplied by the individual proponent teams. We validated their costs to a certain extent, but were not in a position to is used. 11/13/2012 recommend sources of energy. In general, proponent teams have an incentive to procure the lowest cost sources of energy for their proposed project on their own. If PML cannot use all or part of intake infrastructure-what is cost differential 11/13/2012
Page3of13

DRAFT REPORT
No.
Comment By
Page No.
ES-7 NA NA NA
Date of Comment
Comments
Response/Action
The schedules show each project's forecast development from October 2012 on. The schedule start date and subsequent activities are our best estimate of progress going forward. The legal risk of the various projects was outside the scope of our evaluation. The costs presented for the 9 kAFY project reflect installation of 7 slant wells; costs for the 5 kAFY project reflect installation of 5 slant wells. Estimates for both facility sizes are presented in the report. We feel sufficient information is included in the report regarding the SVGB for the purposes or our evaluation. DWD is proposing to proportionally share costs associated with intake and brine disposal facilities proportionally among the Phase 1 and 2 projects. Remaining project facilities would only be constructed for the Phase 1 plant requirement and costs are reflective of that. In service of achieving a balanced evaluation, we will remove the use of corrosion inhibitors from the DWD and PML estimates. We feel sufficient post-treatment will be achieved by the calcite, carbon dioxide, and sodium hydroxide systems included in all three projects. Noted, will amend the description. The costs are roughly comparable--will so state. Yes, use of the Dynegy tunnels is subject to a pending agreement between DWD and Dynegy. The costs would be borne by other entities outside the desalination facility. Evaluated costs for DWD represent the total cost of the facility in production of water. All sites have sufficient space to accommodate temporary storage tanks. No additional costs were ascribed. The results of the DWD intake studies are anticipated to be available Spring 2013. Unknown, but likely not significant. The PML site is an area of the flood plain that does not require flood insurance, so the risk is gauged to be low. See more detailed response above, but it was in service of providing a balanced, apples to apples cost evaluation for the purposes of this report. Agreed, though we feel the $3.0M cost provided by PML as described above along with the overall 30% contingency provide sufficient conservatism at this stage of project development. Costs are included in the evaluation; and a primary reason why Cal Am's plant sizes are higher in the evaluation than PML or DWD. The costs include pumping, treatment and return pumping and piping systems to the existing CSIP ponds. Cost estimates are part of the engineering services we provide. As described, we primarily looked to validate costs provided by the proponents by preparing our own companion estimates. The purpose of our estimates is to provide a balanced comparison of the three projects on an equivalent basis.
16 17 18 19 20
Sue McCloud Sue McCloud Sue McCloud Sue McCloud
Implementation schedules expand for each of 7 points, where is each project now in the process and 11/13/2012 what steps are yet to be accomplished and in what time frame. 11/13/2012 11/13/2012 11/13/2012 Would be helpful to have a map with SVGB superimposed over the Cal Am project. DWD talks about Phases 1 and 2-yet text seems to talk about infrastructure being done at the outset-if so, will the desal project be helping to pay for the larger cost project Saw no mention of legal action impact for any of the projects. Calam project- do costs reflect 8 slant wells or 5 and shouldn't costs have both costs?
Sue McCloud
NA
11/13/2012
21 22 23 24 25 26 27 28 29 30
Sue McCloud
NA
11/13/2012
Both DWD and PML use corrosion inhibitors-is this for intake and outflow pipes? As it does not appear in the Cal Am costs.
Sue McCloud Sue McCloud Sue McCloud Sue McCloud Sue McCloud Sue McCloud Sue McCloud
3-2 NA NA NA NA 3-8 NA
Page 3-2 small matter but the 46 acre parcel is accessed by an easement from the Monterey Regional Waste Management District. 11/13/2012 Fall back for Cal Am's slant wells would be the Ranney well but no indication of cost difference. DWD intake pipe crossing Hiway 1-what is involved in using existing tunnel and was this taken into time 11/13/2012 factor for necessary permissions DWD refers to proprietary systems of MLPP-how will costs be obtained 11/13/2012 11/13/2012 11/13/2012 11/13/2012 11/13/2012 Recommendation for partial second pass RO treatment system-cost Was lack of redundancy for product storage figured in forsome suitable temporary storage? When will additional analysis to assess the vertical mixing zone at the interface of the submarine canyon be completed Cost of construction with in the flood plain
Sue McCloud
NA
11/13/2012 Several unknowns relative tothe outfall-costs and time
Sue McCloud
3-11
11/13/2012 What is process/cost of returning groundwater to the Salinas Basin
31
Sue McCloud
NA
11/13/2012 Economics-evaluated-how and by SPI? Page 5-6 top of page you independently adjust costs and developed your own estimates-hope share systems with someone.
32
Sue McCloud
5-6
11/13/2012
Page4of13

DRAFT REPORT
No.
Comment By
Page No.
Date of Comment
Comments
I also still sit on the board of the Monterey Regional Waste Management District and have recently stepped down as its Vice Chair. It is in that capacity that I wanted to talk to you. Specifically I wanted to know what figure are you using for energy cost? As you perhaps know, the District is planning for a $20M plus new generator to increase the amount of methane gas we convert into energy.
Response/Action
33
Sue McCloud
NA
11/18/2012
It just so happens that our monthly board meeting was this past Friday. At this meeting staff presented 3 years of revenue info re the utilization of landfill gas which currently produces 5 megawatts of Proponents are incentivized to procure the lowest cost of energy for their renewable energy; thus saving the district about $350k in deferred power purchases and sells the projects. excess on the grid. We presently have 2 power sales contacts with PG&E and 3Phases Energy. Williiam Merry is the GM for the District and an engineer. As I understand it you two have not talked and I think perhaps you should to compare the cost of District energy (which I will send or have sent to by email) with your cost projections. We are interested in making this as green a project as possible and in keeping revenues local. First, the estimates for Cal-Am's cost of desal water.appear to be unusually low considering that CalAm's capital costs are $47 million higher than those of Deepwater. Further, I can't find project management fees and Cal-Am's profits from the project in the cost estimates. For information, Cal-Am's project management fees are $25.9 million and Deepwater's are $17.9 million. Dave Stoldt tells me that CalAm's profit level would be approximately $8 million declining by $250,000 each year due to depreciation of assets. Finally, there is an assumption in the [SPI] analysis that warrants comment. That assumption is that Cal-Am's $99 million proposal for zero-cost, advanced funding of its project, courtesy of Peninsula ratepayers, will be operative. This is surprising. The proposal is yet to be approved by the CPUC and has many drawbacks for ratepayers. At a minimum, $99 million in project equity for ratepayers is mandatory if this proposal is to be acceptable. Second,Cai-Am has recently advised that it is looking at a host of contingencies for slant wells. These include: (1) Shallower slant wells; (2) Horizontal Ranney wells; (3) Open ocean intake nearby; (4) Slant well at Moss Landing; (5) Open ocean intake at Moss landing; (6) Locating the desal Plant at Moss Landing. At a minimum, these contingencies give rise to uncertainty and risk as to the course of the CalAm project. Question: Did [SPI] sort through the potential consequences of invoking these contingencies for their impact on Cal-Am's implementation schedule? Third, the environmental information that would support cross comparisons of the intake/outfall systems wasn't available to [SPl]. This information will come from EIRs currently under preparation. This is important because environmental impact information will be absolutely necesary in order to evaluate (1) The impact on sea life; (2) The impact on the seabed particularly from brine disposal; (3) The impact on sea water intrusion. Question 1 : Will these matters fall by the wayside because it is judged that EIR completion times are too far into the future? Question 2: Would this be acceptable to permitting authorities? The final SPI Report should have a listing, at the beginning of the report, of the key assumptions underlying the report's analysis. An example of a key assumption might be that Cal-Am is eligible for public financing. Cal Am's cost of capital will be amended in the final report to reflect their higher cost of financing and overall financial model. This will be accomplished by using a higher, representative capital recovery factor for their project. With regard to the proposed surcharge, we make no mention of it in the report as it is outside the scope of our evaluation. All proponents are gauged to have sufficient capital to pursue their projects going forward--we make no representation further than that. The surcharge is part of an active process at the CPUC and that information is publicly available. Our report reflects information available as of October 15, 2012 for the three projects. The Cal Am contingency plans were in response to an order from the CPUC. We consider the potential for implementation of any of the plans overly speculative at this point. Part of the reason for the recommended 30% cost contingency included in our evaluation is to account for unknowns of this nature.
34
Dale Hekhuis
NA
11/13/2012
35
Dale Hekhuis
NA
11/13/2012
36
Dale Hekhuis
NA
11/13/2012
Text has been added to the report to clarify these points. Detailed assessments of potential impacts of intake and discharge are central to the environmental review of all projects.
37
Dale Hekhuis
NA
11/21/2012
Assumptions are primarily schedule related and these are described adequately in the discussion of proponent schedules. Cal Am's financing model will be adjusted as described above. The economic evaluation in the report seeks to present total costs of each project for production and supply of potable water from a seawater desalination facility on an equivalent basis. We agree that Cal Am has a different cost of capital and will amend that evaluation in the final report. The specifics of funding Cal Am's project are outside the scope of our evaluation. We have assigned a uniform project implementation cost to all three projects in our evaluation to cover project development prior to construction. We feel this estimate, along with the 30% overall project contingency, is sufficient to account for typical delays in project development forecast at this time. Evaluations beyond that are outside the scope of this study
38
Dale Hekhuis
NA
SPI should prepare a memo, for inclusion in the report, listing all costs that dropped out of the the cost analysis because they did not fit an apples to apples comparison format. Simply because costs may not 11/21/2012 have fit the format is no reason to ignore them. At a minimum, the report reader needs to know up-front what Cal-Am's profits are. Ratepayers will be paying for these profits. With regard to the $99 million of advance funding, it should be made clear that it is only a proposal that is yet to be vetted by the CPUC and the DRA. There may be changes in what Cal-Am has asked for in the final version. I feel that it's improper to use a proposal, and that's all that advance funding is, without making it clear to the reader that it is a proposal. As my colleague Doug Wilhelm has recently suggested, an estimate of the additional costs that could be incurred by the slippage of the project completion schedules that SPI has come up with - anywhere 11/21/2012 from 8 months to a year beyond the deadline - is in order. Just how serious is the slippage from a cost standpoint? That is what SPI should be asked to come up with. 11/21/2012
39
Dale Hekhuis
NA
40
Dale Hekhuis
NA
Page5of13

DRAFT REPORT
No. 41 42 43
Comment By
Ron Weitzman Ron Weitzman Ron Weitzman
Page No.
NA NA NA
Date of Comment
11/9/2012 11/9/2012 11/9/2012
Comments
Why the capital structure of 57 equity to 43 debt when the current capital structure is 42 equity to 58 debt? Why 5% interest rate for Cal Am when it currently charges ratepayers 6.48%? Why the interest rate of 4% for a public agency when it could probably get 3.5% or less, and it is a lot more likely to have access to state revolving-fund money at 2.5% than Cal Am? How does the $207 million cost for Cal Am's 9,000 acre-foot project in the table comport with the $365 million in Cal Am's proposal to the CPUC?
Response/Action
The discussion of Cal Am's financing structure will be amended in the final report. The discussion of Cal Am's financing structure will be amended in the final report. The discussion of Cal Am's financing structure will be amended in the final report. The costs provided to the CPUC include additional, common distribution facilities within Cal Am's system that were not included in the project--as they apply equally to all three. Further, the CPUC had Cal Am include an additional contingency in their cost estimate to achieve a "maximum credible cost" for planning purposes. Our evaluation considered all three projects with a common 30 percent contingency alone. PML project timeline has been corrected from the original report. However, the timeline for project description and EIR/EIS remain generic based upon assumed need for detailed evaluations of project intake and discharge impacts. Text has been added to reflect potential delays in the CalAm Project due to delays in the test well project but these have not been fully analyzed. DWD has presented an updated proponent's schedule. See response above. The evaluation of all three projects on an equivalent RO treatment basis does not unbalance it; rather it balances it in evaluating all three projects on an equivalent basis. The Cal Am financing model will be adjusted in the final report. DWD plans to establish a JPA composed of public agencies to own its project. Will clarify in the final report. DWD does not to our knowledge extract groundwater as part of its intake system. For Cal Am, the issue is being vetted through the CPUC process and it's considered unnecessarily speculative at this point to presuppose an outcome. As a general rule, the CPUC as a State agency has broad authority to overrule other agency ordinances in the service of establishing a necessary public water supply. A higher cost of capital for Cal Am will be included in the final report. The cost evaluation in the report covers a 30-year term. Costs beyond that are outside the scope of this evaluation. Not significant. Cal Am is currently offering assessed costs for the property, which would likewise be the cost of any eminent domain The costs will be born under the proposed project structure by a separate entity. That fact is integral to DWD's proposed project. Costs are included as described above. The text is revised to clarify this point. Period for project description includes time for evaluation of intake and discharge impacts associated with the PML project. In the case of DWD a schedule for these evaluations has been presented. In the case of CalAm, the project relies upon prior determinations that the project would have no significant impacts from intake or brine disposal The extent of Phase 2 facilities installed during Phase 1 is limited and accounted for in our evaluation.
44
Ron Weitzman
NA
11/9/2012
45
Ron Weitzman
NA
11/9/2012
The timeline is what troubles me most. The SPI report is based on data available in July. Since then, Cal Am's project has been delayed at least a year, and Cal Am may even have to start all over because of the waterrights issue. The Pacific Grove project is likely to begin work on its EIR before the end of the year, not years off, and since July the project has changed its seawater intake plans so it will not require special pre-processing of the intake water.
46
Ron Weitzman
NA
Why does the Cal Am total capital cost for the 9,000 acre-foot project in each of the two reports differ 11/12/2012 substantially from the $365 million in Cal Ams CPUC proposal? (Likewise, for the 5,500 project) In comparing apples to apples, why does the SPI consultant load the comparison in favor of the Cal Am project by adding a second pass-through RO to the two non-Cal Am projects while using a 4% interest rate for all projects (Table ES-2) when the rate is much lower for a public than for a private project? Why does the SPI consultant not consider that the DeepWater project cannot own or operate a 11/12/2012 desalination plant in Monterey County because it has no public partner? Why does the SPI consultant not take into account the state Agency Acts prohibition of groundwater (not just fresh water, but any groundwater) exportation from the Salinas Valley Groundwater Basin, except for Fort Ord? These last two items are fatal flaws for the DeepWater and Cal Am projects. 11/12/2012 11/12/2012
47 48
Ron Weitzman
NA
Ron Weitzman
NA
49
Ron Weitzman
NA
50 51 52 53 54
Paul Hart Paul Hart Paul Hart Paul Hart Paul Hart
5-4 NA
11/14/2012
(i) would like to see the capital recovery for Cal-Am in Table 5-2 reflect a higher cost of capital, such as 11% (ii) believes there are advantages to ownership in that future lease costs after the thirtieth year should 11/14/2012 be reflected in overall cost of projects which assume leases, in that ownership costs are fully amortized over thirty years; (iii) If Cal-Am needs to assert eminent domain to gain site control, what will be the impact on cost? 11/14/2012 (iv) Did not feel DWD third part intake costs were adequately reflected. (v) Wants to be sure the additional capital and operating costs related to extraction, treatment, and return of Salinas Valley groundwater are fully included in the costs of potable water delivered. (vi) Would like clearer explanation for the difference in timelines why is the PML schedule extended for a detailed project description, but not the other projects?
5-8 NA
11/14/2012 11/14/2012
55
Paul Hart
NA
11/14/2012
56
Paul Hart
NA
(vii) If DWD is a large regional project, with large upfront fixed costs, and the DWD analysis assigns 11/14/2012 only a percentage of those costs, who is paying for the rest and what are the risks that such costs are ultimately passed onto the Peninsula customers?
Page6of13

DRAFT REPORT
No.
Comment By
Page No.
NA
Date of Comment
Comments
Response/Action
57
Nader Agha
Expressed concern that SPI used data from PMLs July submittal, but should have used the updated 11/14/2012 October 2012 submittal.
58
Nader Agha
NA
11/14/2012
59
Nader Agha
NA
11/14/2012
60
George Riley
5-6,5-7
11/12/2012
61 62 63 64
George Riley George Riley George Riley
NA NA NA
11/14/2012 11/14/2012 11/14/2012
Our evaluation included all information provided by PML up to October 15, 2012. We are not aware of any specific inconsistencies with information presented in the draft report. Also expressed disagreement with the reports schedule and believes the environmental document PML Both the PML and DWD have suggested an EIR/EIS review schedule which is potentially shorter than the timeframe presented by the CPUC. has produced, which he referred to as a focused EIR, would expedite the schedule. The report continues to present a generic schedule which is longer than suggested by the project proponents. We do not see adequate rationale to suggest that the EIR for PML or DWD can be completed more quickly than the CalAm proposal. Disagreed with the cost numbers developed by SPI as inconsistent with the estimates PML has already All costs were evaluated on a consistent basis across all three projects. The primary cost increase for PML was that associated with a higher made overall project contingency, which we consider warranted at this stage of development. In trying to understand a few charts, I repeated the math, but found errors. This will not ruin your day, but there are significant math errors on two charts. (for Cal Am and DWD, not PML). Both tallies relate to the same items, but erroneously. Chart 5-3 CAW, and chart 5-5 DWD. The Intake/Outfall cost category in the table includes fixed facilities as well, In Line 8, Plant Facilities (PF) Subtotal All are wrong for CAW and DWD. Footnote 2 referred to including storage tanks and pump stations. We will amend the table to excluding 'off site trenched pipelines', which are Intake/Outfall and distribution. Deducting the numbers break the costs out separately so that costs within the table can be in the chart does not give you the subtotals shown. calculated from the information shown. The subtotal seems like an attempt to isolate some costs for better understanding, but these subtotals are not used any where else in the report. At least I could not find another reference. Maybe these subtotals have been used in financial models (yours?), but I doubt it. That is why I think it will not ruin your day, or SPI either. [Was] the periodic replacement of the slant wells factored into the cost analysis for CalAm's proposed No, though the issue will be investigated in a supplemental evaluation following the final report due in January 2013. project? What is the state of ownership at the end of the 30 year analysis period (terminal year) and can that be The cost evaluation included a 30-year term for the purposes of the report. factored into the analysis? (since presumably all of the plants operate for longer than 30 years) Presumably lease payments for DWD would continue past that time. (i) Where is each project in terms of site control and does it introduce more variability than reflected in the report? (ii) Will an EIS (federal review) be required of Cal-Am and what effect would it have on the Cal-Am schedule? Site acquisition is not considered a significant barrier to any of the candidate projects. The CPUC has solicited input in the scoping hearings to determine if a Federal EIS is required. Depending upon the approach to compliance, an EIS could add 4 months to up to two years to the schedule. Text has been revised to note this uncertainty. The seawater intake is not proprietary, but rather the warming system. Information will be available once agreements have been finalized between DWD and Dynegy, presumably in the next two months. Yes, for the Cal Am project. The PML Schedule has been revised in the text. DWD has shown a proponent's proposed schedule which is substantially shorter than shown in the original draft. The Text comments on this change.
George Riley
NA
11/14/2012
65 66 67
George Riley George Riley George Riley
NA NA NA
(iii) The proprietary intake is an unknown when will more information become available and what 11/14/2012 impact will it have on the analysis? (iv) Is the additional capital and operating costs related to extraction, treatment, and return of Salinas Valley groundwater are fully included in the costs of potable water delivered? (v) it appears there are several items in the Cal-Am schedule being performed simultaneously can 11/14/2012 more tasks be done in parallel to shorten the other projects schedules? 11/14/2012 Profit included as a cost: Apples to apples is incomplete without some component (or comment) about profit. Cal Am will not undertake a project without a profit component. I asked DWD (2 people) if there was profit built into its numbers, and the answers were yes. SPI expanded those numbers, so if profit was already built in, you expanded profit as well. Not apples to apples. I also asked Nader Agha if profit was built into PML numbers. He said no, since most of his asset sale 11/22/2012 numbers were based on depreciated or discounted values, and he does not seek to make a profit on the desal project. Since this is not easy for apples to apples, I have these questions: a) Can you generate an apples to apples for an estimated cost component for profit? b) If profit is built in for DWD, should you exclude it from DWD, or add it to Cal Am? c) Could you verify if profit is in the PML project at all, and if so how, and if yes, how do you present it?
68
George Riley
NA
Cal Am's cost of financing will be adjusted to incorporate their costs, including profits. DWD included their profit in the O&M cost category labeled "Other Proponent Expenses". The cost of PML's site was included as $25M from their supplied documentation.
Page7of13

DRAFT REPORT
No.
Comment By
Page No.
Date of Comment
Comments
Response/Action
69
George Riley
NA
70
George Riley
NA
Profit excluded as cost: If profit is not to be in your comparisons, it should be specifically commented on as needing further evaluation. Cal Am will undergo a deep review by Division of Ratepayers Advocates in CPUC procedures. There is no comparable deep review for DWD or PML, unless it 11/22/2012 occurs by local agencies. So profit has two tracks for review, and should not be treated casually. It will be a known component of Cal Am costs, and so far is relatively unknown for DWD and PML. Will you suggest a procedure for evaluating costs for profit, or a way to address profit and other variable costs that SPI excludes from its report? Schedule question #1. You have indicated you will review these again. I point out one item--Cal Am has several parallel tracks in its schedule--EIR, CPCN and slant well testing. These are expected to merge at later dates. On the other hand, DWD and PML have sequential linear tracks, where similar steps are not run in parallel. Of course your schedule layout has more time for the two at ML, and 11/22/2012 much less time for Cal Am. Your recommended track is linear yet you make no acknowledgement of the higher risk of Cal Am's sequential tracks, i.e., the potential for litigation for procedural grounds. Potential litigation based on inadequate time or consideration of related matters will be a significant risk. You should fully acknowledge these differences, unless you intend to correct for them. Schedule question #2. Section 6.3.1 on PML, SPI refers to an existing NPDES permit and a finding by RWQCB 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." SPI observes these 11/22/2012 facts, yet concludes that PML schedule will require deeper analysis (and delay) because of speculative comparisons to a "no-project alternative". Furthermore PML has an alternative intake option using its large 54" to 60" discharge pipe for inserting a new intake pipe. Can SPI reconsider its conclusions on the PML schedule with a greater reliance on the facts? Comparing "existing infrastructure and entitlement" (PML) to "design and build" (Cal Am and DWD). SPI has made no analysis of the different schedule impacts between two projects (Cal Am and DWD) 11/22/2012 that have no or limited site control, no permit history for intake and/or discharge, and no entitlements for those permits. Whereas PML has all of the above, which could be positive elements for expediting the schedule. Can SPI comment on this? (i) Slant wells appear to be a large cost component is it worth it relative to the use of Ranney wells? 11/14/2012 11/14/2012 (ii) What would be the difference in cost?
See response above.
CalAm has presented a revised schedule for the project. This has not been fully analyzed but text has been added to note the schedule risks associated with delay of the test wells. DWD has presented a proponent's schedule which substantially shortens the project schedule and this is commented upon. PML schedule has been corrected
71
George Riley
NA
The report duly notes that it is possible that PML can certify an EIR without a detailed analysis of the effects of operation of the intake without detailed evaluations of the effect upon the marine environment. The schedule in the report has not been revised. Based upon experience with other ocean desalination proposals in California, it is presumed that substantial evaluations of this potential impact would ultimately be required. Site control is an advantage to PML and the text has been revised on the other projects to note the risks associated with this issue. Permit history has not been considered a factor. The potential entitlement of prior permits is noted in the original text and has not been revised. The costs are comparable. Not significant; potentially slightly less for the Ranney alternative due to reduced connecting piping requirements. As presented, beginning in October 2012. We consider it reasonable based on the level of equipment redundancy proposed. At base however, our evaluation did not consider plant sizing; rather we sought to use consistent sizing/redundancy criteria across the three projects to provide a balanced cost evaluation. Ultimately, plant capacity is an issue for the CPUC and project proponents.
72
George Riley
NA
73 74 75
John Narigi John Narigi John Narigi
NA NA NA
11/14/2012 (iii) Where is each project in the schedule right now? (iv) Is the operating assumption of running the Cal-Am facility at 98% capacity realistic or sensible should capacity be larger? 11/14/2012
76
John Narigi
NA
77
John Narigi
NA
78
John Narigi
NA
79
John Narigi
NA
80
John Narigi
NA
The schedule will be updated to reflect the new date, currently forecast as Nov. 2013, in a supplemental report due in January 2013. The project EIR for CalAm is presumed to cover the larger size project that does not depend upon groundwater replenishment project moving forward. 11/14/2012 This consideration of maximum potential impacts is appropriate and should prevent substantial delays from occurring should the groundwater replenishment project be aborted or delayed. (vii) What would the two Moss Landing projects charge Cal-Am as the wholesale cost of water how is The structure of a future water supply agreement among the parties is 11/14/2012 outside the scope of our evaluation. that to be determined? (viii) What are the cost and schedule issues, if PML infrastructure is determined to be in worse condition The major schedule drivers relate to environmental and permitting issues. Presumably a more detailed assessment of current infrastructure condition than described? 11/14/2012 would be undertaken as part of the predesign process. There is sufficient time within the proposed construction schedule to accommodate rehabilitation of facilities as needed. 11/14/2012 (v) What is the schedule for slant well testing and Coastal Commission approval, and does the Cal-Am schedule adequately reflect it? (vi) What impact will the groundwater replenishment CEQA delay have on the overall Cal-Am CPUC application and schedule?
Page8of13

DRAFT REPORT
No.
Comment By
Page No.
Date of Comment
Comments
(i) the water quality of each proposed project appears to vary, as described in chapter 4 is there a common standard, and does the financial analysis bring them to the common standard?
Response/Action
The information provided in Chapter 4 summarizes the quality produced by the proponents' proposed systems. In our cost evaluation, we assumed each treatment facility would produce a consistent quality of water; and amended proponent costs accordingly. Agreed, will update text. Brine dispersion was not included in the evaluation, beyond a review of the Trussell Technologies Inc. investigation which we found credible at this stage. Presumable the issue will be investigated further as the project predesign and permitting processes advance. We do not consider it a large technical concern. Agreed.
81
Rick Riedel
NA
11/14/2012
82
Rick Riedel
NA
11/14/2012
(ii) We should be reminded that the fatal flaw sections are technical in nature, not legal and/or political, which do pose significant risk (iii) Does the analysis adequately address whether sufficient dispersion of brine discharge can be achieved, and if not, what is the incremental cost to do so?
83 84
Rick Riedel
NA
11/14/2012
Rick Riedel
NA
85
Rick Riedel
NA
86 87
Rick Riedel Rick Riedel
NA NA
11/14/2012 Change statements to no [technical] fatal flaws were found Add Legal and financial considerations, such as water rights and payment schedules (such as Surcharge 2 by Cal Am), were not evaluated. You may want to elaborate on why it is inappropriate to 11/14/2012 consider potential cost associated with financing the project in this type of report. Also, you may want to provide caveats for the accuracy of the estimated costs and that the cost analyses given are for evaluating the feasibility of the alternatives and are not intended to reflect potential actual costs. 11/14/2012 How were the finished water quality values derived shown in the tables in Section 4? Do the differing finished water quality values in Section 4 affect the cost comparisons given in Section 5? If so, is it possible that the cost analyses be revised so that every alternatives treatment scheme is 11/14/2012 modified (e.g. not require 40% second pass) so as to provide the same finished water quality? Two of the potential desal projects, DWD and PML, are proposing to use open ocean intake without considering any alternatives to open ocean intake. My understanding is the Coastal Commission would consider open ocean intake in the event that it is shown to be the "least environmentally harmful 11/21/2012 feasible alternative." That is, the Coastal Commissions Policy is to not allow an open ocean intake unless it is demonstrated that other alternatives are unfeasible. To my knowledge, no work has been performed to date by either DWD or the PML to demonstrate this. 11/21/2012
Agreed.
They were extracted from information provided by the proponents. The cost evaluation we prepared did assume a consistent product water quality; and proponent costs were adjusted to include the required treatment process equipment.
88
Rick Riedel
NA
89 90
Rick Riedel
NA
Rick Riedel
3-11
11/21/2012
91
Rick Riedel
NA
11/21/2012
92 93 94 95 96
Rick Riedel Mayor Burnett Mayor Burnett Mayor Burnett Mayor Burnett
NA ES-9 4-4 4-5 NA
11/21/2012 11/13/2012 11/13/2012 11/14/2012 11/14/2012
97
Mayor Burnett
5-7/5-8
11/14/2012
Minimal text has been added to Section 6 of the report to discuss Coastal Commission and NOAA policies. However, time and budget constraints do not allow a thorough evaluation of these comments. The report notes that this should be a focus of future analyses. It is desirable though uncertain that the CPUC EIR and proponents' EIR's would offer a comparison of open intake and subsurface intakes for comparison. The JPA has made thoughtful comments in the scoping hearings which would improve the Energy costs will be adjusted to account for differences in pumping Should DWD be given credit (i.e. either a greater RO flux or lesser energy usage) to account for the requirements among the three proponent projects. preheat? Page 3-11 states that PML will pretreat with coagulant and UF. Is it cost effective to remove coagulant Coagulant can be used successfully with MF/UF. The overall PML pretreatment design was maintained as proposed with the understanding with UF? Is it necessary to add flocculation prior to filtration? that a planned one year pilot program would be used to finalize the process design. The existing infrastructure at PML may be a liability, instead of an asset. For example, I believe that Information on the existing equipment was not provided. In general, the California Dept of Health requires all pumps for water systems to be lead free. Most older pumps contingency allowance and proposed rehabilitation allowances provided by contain some lead as an alloying element. Do the existing PML pumps contain lead? Another example, many older storage tanks contained PCBs in the caulking. Do any of the PML tanks contain PML should be adequate to cover potential rework. PCBs at a level that may be of concern? Cal Am has a high pumping cost associated with it's supply wells along The lower O&M costs for PML is counterintuitive considering the feed water from the harbor is with a higher cost of electricity; while DWD had an artificially high cost potentially both highly variable and contains more organics than the other alternatives. That is, O&M costs for PML are estimated to be lower than the other 2 alternatives. I would expect PMLs O&M costs associated with its proponent expense category as described above. The costs will be adjusted in the final report. to be greater. "10,730 AFY in access of its valid right of 3,376 AFY." Should be "in excess of..." Noted, will correct. "In general, DWD proposes to provide a product supply that is compliant with all applicable drinking We consider the terms synonymous but will change to non-corrosive. water regulations, is non-aggressive..." Should this be "non-corrosive? DWD and PML appear to underproduce in the 5,500 AFY scenario as shown, for example, on page 4- Chapter 4 presents the proponent proposed system designs; along with our 5? proposed adjustments to their respective facility capacities. It would useful to identify the key variables that affect cost and schedule and request SPI do a Additional sensitivity analyses related to cost of energy and slant well sensitivity analysis on those. For example, they already have done sensitivity analysis on the cost of replacement will be included in a future supplement to the final report. electricity at least for Cal-Am's project. The economics would not change much as the major shared cost Determine how sensitive the cost effectiveness of DWD is to the assumption that they will be able to component is the planned intake pipeline which is not part of their costs. build a 25,000 AFY plant. If that does not come to pass and the capital costs of pipes, etc will need to Most facilities would be built for the required plant capacity increment in be spread across a smaller volume of water, how much more expensive is that water per acre foot? Phase 1 and include those costs alone.
Page9of13

DRAFT REPORT
No. 98 99 100 101 102
Comment By
Mayor Burnett Mayor Burnett Mayor Burnett Mayor Burnett Mayor Burnett
Page No.
NA NA NA NA NA
Date of Comment
Comments
Response/Action
It is a risk that will need to be evaluated as the project advances. From a technical perspective, there is no reason to believe the existing intake could not be reused. There are barriers to implementation of any of the three projects. With the 2016 deadline, schedule risk should likely have primacy in the absence of gross cost differentials. Unknown. They are currently not the preferred alternative within State regulatory authorities and therefore subject to unknown schedule risk. The overall regulatory framework has changed since Poseidon started its project, so it's difficult to draw firm conclusions. The surcharge issue is currently being examined through the CPUC and is not included in the scope of this evaluation. See above. Cal Am's cost of financing will be adjusted in the final report. Will correct. Will update.
11/14/2012 What happens to PML and DWD if MLPP is shut down or once-through cooling ceases? For PML, how do costs change if existing intake system is unusable? 11/14/2012 How should we evaluate schedule risk versus cost of water? 11/14/2012 11/14/2012 How much will it cost our communities to have a project delayed by 6 months? What can be learned about schedule risk (especially for open ocean intake) from the Poseidon experience? 11/14/2012 Questioned the use of Surcharge 2 for funding a portion of the Cal-Am project, suggesting that it should 11/14/2012 be made available to the public projects or removed from the Cal-Am analysis especially since the CPUC may not allow it in whole or in part. 11/14/2012 Also questions the use of Surcharge 2. Questioned why the capital costs for the Cal-Am project are so much lower than Cal-Ams published 11/14/2012 estimates in their application and presentations to the community. 11/13/2012 two lines up from bottom Cal-Am should read DWD Replace Text in Footnote 3: Capital recovery factor for DWD and PML based on an interest rate of 11/30/2012 4.0% and term of 30 years; based on an interest rate of 8.49% and 30 years for Cal-Am. 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 PML. In this case, the CRF equals 0.05783
103 104 105 106 107
Doug Wilhelm Dale Hekhuis Safwat Malek Dave Stoldt Dave Stoldt
NA NA NA 5-8 5-4
108
Dave Stoldt
5-5
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 11/30/2012 than shown. However, there are additional differences in how public versus private capital investments Will update. 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%)]}/2 + (3.33% annual depreciation) = 0.092933 proxy CRF
Page10of13

DRAFT REPORT
No.
Comment By
Page No.
Date of Comment
Comments
Response/Action
109
Larry Parrish
NA
Independentfactchecking Severalmonthsago(perhapsayear)CalAmproducedaninternalstudyoncomparativecostsof anewwaterproject,whichincludedabout11differentoptionscoveringdesalination,ASR(aquifer storage&recovery),GWR(groundwaterrecovery),conservation,andperhapsothersources.The This study evaluated costs provided by the proponents as of October 15, 2012 for their current projects. Evaluation of other cost estimates was not optionscoveredvaryingcombinationsofthesewatersourcesandthecostsforeachoption, includingdesal.Well,ifyoureviewthatCalAmstudyIthinkyouwillfindthattheestimatedcostsof a part of our evaluation. theCalAmwaterproject(desal)inthatstudyvarygreatlyfromtheestimatedcostsrepresentedin 11/27/2012 With regard to the proponent questionnaires, we did evaluate their theSPIReportandthefinancialanalysispreparedbytheMPWMDfortheMPRWA.Whyisthere responses as part of the information we reviewed and considered as part of suchadifferenceincostsbetweenthesetwostudies?Whathaschanged? work. Where we found the information was insufficient, we asked Also,evidentlythethreeproponentsofdesalproposalsanswereda55questionquestionaire.Is additional questions of the proponents and/or adjusted costs in our thereindependentverificationoftheinformationthatwasprovidedinthosequestionaires?Ifnot, economic evaluation. therecertainlyshouldbe.Tobesure,ALLoftheinformationprovidedbyCalAm,DWD,andPML shouldbeverifiedbyindependentsources. TotalCostsofDesal AnyestimatesofthecostofanewdesalplantMUSTincludeALLofthecostsassociatedwiththe We believe all applicable costs related to the facility permitting, design and 11/27/2012 constructionofthedesalplant. construction have been considered. Thiswouldincludethe$99millionsurcharge;financecharges;profitsbythebuilderoftheplant(Cal Am);litigationcosts;wells;landacquisition;etc.ALLcostsmustbeincluded!!! Delays Delaysinpermitting,construction,litigation,politicaldickering,etc.willundoubtedlyincreasethe The recommended 30 percent overall project contingency should be 11/27/2012 finalpricetagofthedesalprojectandtheseshouldalsobeincludedinthetotalcost. sufficient to cover many of the unknowns related to the project at this time. Thismayentailsomedifficultyinestimatingthecostsduetodelays,butshouldbeincludedatleast asestimatedcosts.
Missing the deadline There is a deadline in the CDO 95-10 which could also effect the final pricetag of desal. My opinion is that the water will not be shut off - affected cities and the county can declare a state of emergency which will override the order by the State Water Board. However, some rationing may occur. If rationing does occur, this could also affect the final price of desalination. Cal-Am has stated publicly several times that if conservation (also known as rationing) increases, the cost of water per acre-foot ($/AF) will also increase in some proportionate formulized fashion. Cal-Am has fixed costs and are legally entitled to recover those costs. The actual amount of The outcome of a missed deadline is speculative at this time; and an 11/27/2012 water they distribute is then somewhat irrelevant. If they sell a million AF of water, or ten million AF, evaluation of the impacts are outside the scope of our evaluation. they will still attempt (successfully) to recover a relatively similar amount from the ratepayer based on their expenses. This means a RATE INCREASE. Well, such a rate increase will increase the overall price per AF of water , which will likewise affect the final average $/AF of the overall project. This should be factored into your evaluation also. I guess you need to determine how soon each project can be completed, and of course the longer it takes to complete the project, the more expensive it will be. Cost controls This may not figure into your evaluation at this time, but upon selection of and approval of a final 11/27/2012 project, there should be sufficient cost control guarantees written into the final agreement. Cost overruns should be accounted for and costs beyond that should be borne by the builder of the project.
110
Larry Parrish
NA
111
Larry Parrish
NA
112
Larry Parrish
NA
113
Larry Parrish
NA
Noted.
Page11of13

DRAFT REPORT
No.
Comment By
Page No.
Date of Comment
Comments
Response/Action
114
Alan Haffa
NA
The Report makes it sound like the fact that Cal Am's slant wells will be in the path of future shore erosion in the next 40 years a minor issue because the life of the project is only 30 years. That seems insane to me. We are spending 200+ million on a project whose life is only 30 years? If we have to 11/27/2012 redrill the slant wells in 30 years, a short window for such a large capital project if you ask me, then that cost should be factored into their plan. In my view, the shore erosion is a "fatal flaw" for the CalAm plan. The Report assumes that all three projects will spend the same amount on financing, but is that a reasonable assumption? My understanding is that Cal Am cannot borrow at the preferred rates a government body can, but the other two projects will not go forward without a sponsoring public agency and the correspondingly lower bond rates. This seems like a large cost factor that the SPI report ignores essentially. (See note 3 and bottom of page 5-4 and 5-5, which says that a "uniform capital recovery factor was used across all three projects at an interest rate of 4.0 percent."). My estimate based on the percents given on 5-5 is that financing for Cal Am would cost 22 Million more. The Report claims on page 3-3 that there will be no permanent aesthetic impacts from CALAms project, but their slant wells will occupy 700 feet of shoreline with industrial equipment in a place that currently has nothing like that--how can that not be a permenant negative aeshtetic impact? The claim on page 3-7 about DWD stretches credibility: "there is no expereince 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 treament process." Really? They are taking water from deep under the ocean where there is far less organic material to begin with, and filtering it. Now, are we supposed to believe that in the amount of time it takes to warm the water and pipe it to the treatment center that this deep water will suddenly sprout with life? It seems like a very weak assumption ont he part of SPI and while it is true that there is no experience proving otherwise, there is also no experience proving that it will occur and common sense argues against it. How will source water that is lower in "turbidity and suspended solids" than the other two projects suddenly experience an outbreak in biological fouling just because of warming the water? On page 3-8 "the nature of the agreement between DWD and Dynegy is still confidential between the parties" IS a legitimate concern. The public needs to know the nature of that agreement to predict long term costs and that is a non-starter to any negotiations with DWD. On page 3-10 the report claims that PML is in a flood plain. How serious is this threat? How often has the area been flooded in the past 100 years? Can the facility be built to be flood protected?
Cal Am is currently evaluated design and location of the slant well facilities that will place major infrastructure outside of the erosion zone. Further, a supplemental evaluation will examine the impact of increase replacement frequency for the slant wells.
115
Alan Haffa
5-4,5-5
11/27/2012
Cal Am's cost of financing will be adjusted in the final report.
116
Alan Haffa
3-3
11/27/2012
The intake pumps will be located in subgrade vaults, limiting the surface impacts.
117
Alan Haffa
3-7
11/27/2012
Biofouling of RO membranes is a common challenge for open-intake seawater desal facilities and is not primarily a consequence of multicellular marine organisms, but rather bacteria--which can be present at depth. Generally, bacterial growth rates and patterns can accelerate with increases in temperature--a feature that has been observed at facilities treating the warm water return from power plants.
118 119
Alan Haffa
3-8
11/27/2012
The agreement is nearing completion and should be available for review soon. The overall risk is low as described above.
Alan Haffa
3-10
11/27/2012
120
Alan Haffa
NA
The pipe disrepair in PML is legitimate concern but it seems like it should involve less permitting costs to repair existing pipes rather than seek permission to install new ones. It seems like given the concerns As stated above, PML has included costs for repair of its intake and outfall 11/27/2012 with the pipes and pumps, PML should assume all new equipment in costing the project. In comparing facilities; along with an overall 30% cost contingency we applied in our evaluation. PML and DWD I would like to see a cost comparison that assumes new equipment/capital for PML. On page 4-6 the report argues that an "unknown level of organics may be prsent in the harbor-extracted supply." This seems reasonable; however, it also seems likely for the Cal Am slant well, which after all, is taking water from beneath sand dunes. The only project that can reasonable assume a low level of organics in source water is DWD. The Report rightly assumes that DWD and PML will add second pass reverse osomosis, just like Cal 11/27/2012 Am proposes. We can't afford to spend this much money and then have a poor tasting supply of water. That would be a horrible outcome The report says that Cal Am will have to acquire land for its treatment facility that it does not own and that it could use eminent domain. It wasn't clear to me that the costing included the cost of this land acquisition and likely court related costs if it went to eminent domain. Aside from that, I don't know that we want to be associated with a project that has to use eminent domain if other options are available. 11/27/2012 Based on this, I have even more concerns with the CalAm proposal both because of the Slant Wells (aesthetic impact AND erosion and cost of rebuilding) and the potential litigation over eminent domain. Additionally, it is still the most expensive plan even when you assume comparable bond rates, which is a bad assumption. 11/27/2012
121
Alan Haffa
4-6
Disagree, the level of organics in well supplies is generally lower than in open intakes.
122
Alan Haffa
NA
Agreed.
123
Alan Haffa
3-2
The cost of eminent domain acquisition of Cal Am's site is not expected to significantly increase cost or the overall project schedule. Cal Am is actively engaged in acquiring its proposed site at this time.
124
Don Lew
NA
12/4/2012
Moss Landing Commercial Parkway (MLCP) provided SPI with full responses to their requests for We feel we fairly represented information provided by PML in our information regarding the proposed desal plant at MLCP. The information provided by MLCP has been evaluation and report. distorted in the evaluation prepared by SPI and does not accurately reflect our responses.
Page12of13

DRAFT REPORT
No. 125 126
Comment By
Don Lew Don Lew
Page No.
NA NA
Date of Comment
12/4/2012 12/4/2012
Comments
We will not continue to participate in a so-called comparison when the information provided to you for comparison has been distorted, misinterpreted and changed without out permission. If you want information as to what we are referring to with regard to the inaccuracies please call me so the supporting documentation can be provided to you. I can be reached at 925-586-2433.
Response/Action
The report is solely the work product of SPI and KHC. Per instructions from the MPRWA, all comments were to be provided in writing.
Page13of13

MPRWA Evaluation of Seawater Desalination Projects Final Report December 2012

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MPRWA Evaluation of Seawater Desalination Projects Final Report December 2012

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Evaluation of Seawater Desalination Projects

Final Report December 2012

Monterey Peninsula Regional Water Authority

Separation Processes, Inc. and Kris Helm Consulting

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

ABBREVIATIONS AND ACRONYMS

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

Monterey Peninsula Water Supply Project (MPWSP)

Production Volume 5.4 mgd or 9.0 mgd

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

DeepWater Desal (DWD)

The Peoples Moss Landing Water Desal Project (PML)

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

Table ES-2 - Summary of Evaluated Capital and Operating Cost Estimates

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

Figure ES-1 Projected Cal-Am Project Implementation Schedule

Figure ES-2 Projected DWD Project Implementation Schedule

Figure ES-3 Projected PML Project Implementation Schedule

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

Project Name Proponent(s) Location Purpose

Production Volume Key Features

Key Information Provided

Persons Interviewed/Corresponded With

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

Figure 2-1 Cal-Am Project Location Map

____ Slant Well ____ Intake

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

Project Name Proponent(s)

Production Volume Key Features

Key Information Provided

Persons Interviewed/Corresponded With

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

Figure 2-2 DWD Project Location Map

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

Project Name Proponent(s)

Production Volume Key Features

Key Information Provided

Persons Interviewed/Corresponded With

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

Figure 2-3 PML Project Location Map

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

DEEPWATER DESAL (DWD) Project Purpose

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

Feed Water Characterization

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

Slant Well Intake