By John Earl
Surf City Voice

John V. Foley, chairman of the Metropolitan Water District of Southern California, failed to report over $248,000 of income from his wife, Mary Jane Foley, back to 2004, records obtained by the Surf City Voice under the Public Records Act show.

The California Fair Political Practices Act requires government officials, including employees and consultants, to publicly disclose their relevant economic interests, often including spousal income, within 30 days of assuming office and annually thereafter.

The officials make their disclosures on a Statement of Economic Interests or “700” form with their respective agencies, after which the information goes to the county and state. The report helps to highlight potential conflicts of interest they may have with issues that come before a government decision making body.

Under the Act, water board directors are required during meetings to disclose any potential conflicts they have with agenda items and to recuse themselves from the decision making process by leaving the room (for consent calendar items they must recuse but can stay in the room).

California Government Code 1090 is even stricter than the ACT.

Recognizing the indirect as well as direct influence that public officials have on decision making, 1090 prohibits any financial conflict of interest by those officials over contracts, even if the official isn’t voting; those officials, it says, “shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members.”

Since 2001, public records obtained by the Voice indicate, Foley’s wife has run her own business, MJF Consulting, Inc., while being paid directly or indirectly for consulting work by water agencies throughout southern California, including the MET and the Municipal Water District of Orange County (MWDOC).

Foley, who has served on the MET since 1989, claimed that he was unaware of any obligation to report his wife’s income.

“I never felt it was required. You know, I don’t have no problem with it,” he told the Voice after a MWDOC meeting last September.

The Voice became aware of some of Foley’s missing financial disclosures after examining his 700 forms going back to 2006. But when questioned, Foley said that he had never reported his wife’s income.

But on October 25, a month after he was questioned by the Voice, Foley filed amended financial disclosures back to 2004 that include most – but not all – consulting income from his wife for each year, records show.

Foley did not respond to requests by the Voice to explain why he updated his disclosure reports and why they are still incomplete. But, according MWDOC General Manager Kevin Hunt, who was present at an interview with Foley conducted by SoCal PBS, Foley said that he had been advised by MET attorneys that it would be “more transparent” to revise his disclosures.

MET spokesperson Bob Muir refused to reveal any confidential advice given to Foley by MET legal counsel, but he did say that no disciplinary action was considered by the board for failing to comply with financial disclosure laws.

The still (partially) missing disclosures involve a three-year $125,000 contract between Byran Buck Associates (BBA) and five water agencies: the MET, MWDOC, San Diego Water Authority, West Basin Municipal Water District and the City of Long Beach Water Department.

Under the terms of the contract, which was administered by the MET, Mary Jane Foley was guaranteed a minimum amount of work as a subcontractor. She was paid $160 per hour or about $45,000 over the contract period. A total of $108,945 or $21,789 each was spent by the five agencies.

The contract was approved by the MET’s general manager, so it did not go to the board for a vote, although contracts for far less value sometimes do– a matter of the GM’s choice, according to MET regulations, when a contract is for $250,000 or less.

The BBA contract violated the law, says former Huntington Beach mayor Debbie Cook, who is also an environmental attorney. Cook has been examining the complex and often hidden operations of local water agencies and was recently interviewed as part of a PBS SoCal expose of the Santa Margarita Water District in south Orange County.

‘A Clear Violation’
Referring to the three-year contract, Cook concludes that it directly benefited long time director Jack Foley and his wife Mary Jane Foley.

“This is a clear violation of Government Code Section 1090. An agency like MWD [MET], with the kinds of resources it has available, should know better,” she wrote in an e-mail to the Voice.

Efforts to contact Chairman Foley since September have been unsuccessful, so far. But MET media spokesperson Armando Acuna, responding to inquires about the legality of Chairman Foley’s standing under 1090, told the Voice, also by e-mail, that “Metropolitan’s Legal Department represents Metropolitan and cannot give legal advice or a legal opinion to members of the public.”

The minimum estimate of $248,000 of unreported income is based on the BBA contracts as well as direct contracts between MWDOC and MJF Consulting, Inc., matched against income sources revealed in Foley’s amended 700 filings (but not including income from other, mostly private, sources that were also part of the amendment filings).

Mary Jane Foley’s work with the five water agencies involved regulatory, permitting and lobbying issues for a proposed ocean desalination plant at Dana Point and for the growth of ocean water (and brackish water) desalination plants throughout California. She is still under contract with MWDOC.

As Chairman of the MET, John Foley selects all members of all standing MET committees and appoints the chairpersons for all special committees and task forces. Before starting his second stint as chairman he headed up the MET’s Special Committee on Desalination and Recycling from its start in 2009 through 2010.

Foley regularly votes on desalination issues at the MET and discusses them at various MWDOC meetings. He is highly venerated by his peers throughout southern California and has strong Republican Party connections going back decades.

The MET casts a vast influence as a water wholesaler over all of southern California, including Ventura County, the Inland Empire, Orange County and San Diego. It delivers 1.6 billion gallons of water per day to 26 cities and water districts, including MWDOC, and to 19 million people, according to its website. MWDOC, in turn, helps manage water for its 28 water agencies and member cities in Orange County.

Foley is one of four appointees chosen by the MWDOC board of directors to represent it on the MET – and he is one of two within that group who were not elected by voters to either board.

The other unelected MET director representing MWDOC is Linda Ackerman. Her husband, Dick Ackerman, is a former California state legislator who works for Nossaman LLP, an Orange County legal and policy consulting firm under contract with MWDOC. Linda Ackerman includes that income source on her 700 forms.

A Seasoned Water Veteran
Cook is skeptical of Foley’s claim that he didn’t think he had to report. “He is a seasoned water veteran. He has received many hours of required training on avoidance of conflicts of interest, and it was common knowledge among his colleagues and MET staff that his wife’s income was derived from the same public agency [MWDOC] that he serves—shame on the entire industry that does not seem willing or able to police its own.”

Based on his impressive resume, Foley would seem anything but a novice when it comes to understanding the rules of water boarding.

He first came to the MET board of directors in 1989 as an appointee of MWDOC. He served as MET chairman from 1993 – 1998 and was elected again by that body to be chairman for a two year term starting in 2011.

From 1979 until Dec. 2007 Foley was also the General Manager of Moulton Niguel Water District in south Orange County. Moulton is one of five water agencies that make up the South Orange Coastal Ocean Desalination Project, a group that plans to build an ocean desalination plant in Dana Point—under guidance from MWDOC and with promised financial assistance from the MET.

Seven months after John Foley left Moulton his wife was warned of a potential conflict of interest with her work on the Dana Point desalination plant because her husband had been involved in that project as Moulton’s general manager. In an e-mail obtained by the Voice, Mary Jane Foley asks MWDOC’s project managers Richard Bell and Karl Seckel what she should do:

“Richard has informed me that since Jack is a signature to the participating desal group from MNWD, I will be perceived as a conflict. Richard said that South Coast will run my contract. How will this all be determined? Do I stop all work and communication with you all now?”

In this e-mail, Mary Jane Foley asks about a conflict of interest between her work and her husband's involvement in a project. To view at full size, click this image once, then after it appears in a new window, click it again.

But Mary Jane Foley continued her consulting work with MWDOC, as well as her work as a subcontractor for Byran Buck Associates. And what could have been taken as a wake up call for her husband – to report a potential conflict of interest on his 700 forms – was overlooked, at least until after the Voice forced the issue.

If hands-on experience isn’t the best teacher, then mandatory ethics training every two years also helps water board directors in California to understand their legal and ethical obligations to the public. Chairman Foley completed ethics classes given at the MET in 2008 and 2010.

He would also have received a copy of the MET’s ethics manual for directors, which reminds its readers of two levels of ethical practice. The first is compliance with “relevant laws, rules, regulations and policies” that come with the job. The second is a “level of ethically ideal behavior in which Directors, officers and employees strive to incorporate Metropolitan’s core values in their daily work.”

That work ethic is also spelled out clearly in the MET’s Administrative Code, Section 7102, which, it might be safely assumed, was also presented to Foley for his reading. On the matter of disclosure, it says, “Directors shall comply with applicable laws regulating their conduct, including conflict of interests and financial disclosure laws.”

When the Voice asked Chairman Foley (in September) if he saw any conflict between his support of desalination projects as a MET director and his wife’s extensive work promoting desalination for MWDOC (at that time the Voice was still unaware of the BBA contract), he denied any conflict and said, contrary to public records, that she had “very little” involvement in desalination issues. “I have nothing to do with it [her work],” he added.

Foley was indifferent when asked about a vote he cast—as a director and while he was Chairman of the Special Committee on Desalination and Recycling—for the MET to join CALDESAL, a pro-desalination lobbying organization that public documents show his wife played an important role in forming while under contract with MWDOC.

“Did the MET show me as voting for it,” he asked. “Whether she was involved or not, I would have supported it,” he said, laughing.

Besides, he explained, “It’s not really a conflict of interest. You’ve got to draw a direct line to really make a point of conflict of interest.”

Foley was obliquely, whether accurately or not, comparing his own situation to legal exemptions that are made in cases where the conflict of interest is, in legal parlance, remote.

“You know, I believe in conservation,” he said, rhetorically. “Does that mean I have a conflict of interest because we voted for conservation?”

By John Earl
Surf City Voice

An Irvine water official recently let members of the Municipal Water District of Orange County (MWDOC) board know that their public relations efforts on behalf of ocean desalination aren’t necessarily welcomed in his agency’s jurisdiction, which stretches across the county’s mid-section as its largest water district.

MWDOC is the retailer for 28 water agencies throughout the county.

Open dissent by local water officials toward ocean desalination projects is rarely if ever heard at MWDOC meetings, where the belief that such projects, however costly, are a vital part of a larger water portfolio is all but officially treated as sacrosanct.

The official, Peer Swan, one of five directors for the Irvine Ranch Water District, spoke out at a monthly meeting of MWDOC’s Public Affairs and Legislation Committee held on Monday, Dec. 19. He told the board that the agencies that don’t agree with the premise of the PR campaign should be able to opt out.

“I would expect that you would respect your customer’s request not to go in and do a PR campaign on something they don’t support,” Swan said.

MWDOC’s directors were discussing plans to increase their efforts to educate county residents about the supposed needs for ocean desalination in Orange County.

MWDOC wants to convince county residents that desalinated ocean water will guarantee them an endless and reliable supply of drinking water during future water shortages to be caused – inevitably – by droughts or by earthquakes that will break water supply lines; or worse, cause the collapse of the California Delta, which supplies about half of Orange County’s water.

MWDOC is pushing two major ocean desalination projects in Orange County. One of them would be in Huntington Beach where Poseidon Resources, Inc. won approval by the city to build (with the help of huge public subsidies) one of the largest and costliest desalination plants in the western hemisphere (the other, similar plant, would be built by Poseidon in Carlsbad in San Diego County)—after offering tax increments and other financial benefits.

Poseidon is stumbling its way through the final stages of the permit process but still lacks private financing. MWDOC is seeking $350 million in public assistance to make the project cost effective for the company and to attract the private investors that it (Poseidon) needs to move forward.

The other, smaller project, which is backed by five south county water agencies, would be publicly owned and located adjacent to San Juan Creek on property that is owned by South Coast Water District.

Unlike the Poseidon plant, which would suck in over 100 million gallons of sea water a day through the intake pipes used by a huge power plant, its ocean intake system would be buried under the beach at Dana Point, where a pilot plant already is operating.

Far from shovel ready, the Dana Point desalination project seems headed for a decision by the local agencies sometime in 2012. From that point it would move into the final design stage and permitting by the relevant government bodies. Construction would start in the 2017 or 2018, according to project manager Karl Seckel.

MWDOC’s staff provided details of the agency’s strategy for gaining public support for the Dana Point project at the meeting.

“We have been working with the project participants to begin getting either letters of support or formal endorsements from community groups, business organizations, and environmental groups within their area, but also county wide,” explained David Cordero, MWDOC’s Director of Governmental Affairs.

Responding to Swan, General Manager Kevin Hunt elaborated on the broader scope of MWDOC’s outreach efforts, including the Poseidon project, which 21 county water agencies, including IRWD, have indicated an interest in, however tenuous. Very few of those agencies disagree with continuing to discuss ocean desalination “as a viable option county wide,” he said.

MWDOC Director Wayne Clark, whose district makes up about half of the IRWD service area, took umbrage with Swan’s suggestion that MWDOC was out of touch. “I represent Irvine as well as other areas and I think that I’m quite capable of communicating with my own constituents,” he said.

But Swan persisted. “We’re in negotiations with Poseidon,” he said. “Until we get a negotiated contract, I think that using the MO that they used in San Diego, creating a tsunami before the agencies approve things, is an inappropriate thing in Orange County.”

Swan told the Voice after the meeting that he doesn’t want the county’s water agencies to be boxed into supporting programs that don’t make much sense. And he thinks there should be a defined program with agreed upon principles and financing before MWDOC or its agencies seek public support for it.

Swan is personally opposed to both ocean desalination plants but not for any of the environmental reasons often listed by other opponents, who are concerned that, especially in the case of Poseidon, marine life will be killed by the associated intake and outflow systems. He is opposed because he believes that neither project will fulfill its intended purpose—to provide a needed or cost-effective water supply.

An ocean desalination plant by its nature has to run 24/7, an expensive operation, Swan says; but the Metropolitan Water District of Southern California (MET), MWDOC’s umbrella agency, “already provides a reliable supply for water for South County 98 percent of the time at a fraction of the cost of the [Dana Point] desal plant.”

Results of a recent poll conducted by Lewis Consulting

And South County residents would be subject to any water shortages (including rationing) that the MET would apply uniformly as a matter of policy, he adds.

“So the plan itself doesn’t supply water in the event of shortages,” Swan said.  “A couple of hundred million dollars for a very small amount of water is a very expensive project for shortages. And there are much cheaper alternatives to provide reliability to South County which have not been as actively pursued.”

There is no need for the Poseidon project either, according to Swan, because it would serve an area that already gets 70 – 80 percent of its water from an existing underground water supply that could provide 100 percent of the water needed in an emergency.

“What these projects will do is provide an expensive new source of water for MET that the local agencies will pay for,” Swan says. “It will add reliability to the MET system because if you produce water in Huntington Beach or Dana Point, MET will no longer need to supply them because there is cheaper water elsewhere. Thank you very much!”

In this election season, as Orange County voters are constantly warned about government overspending, including bullet train boondoggles, ocean desalination critics like Swan may have found a crack in the veneer of unanimity that MWDOC uses as a cloak to protect and promote its desal dreams.

A new poll, conducted for MWDOC by Lewis Consulting, with a sample of 500 registered Orange County voters, shows a statistically significant decline in support for ocean desalination—from 73 percent in 2008 to 63 percent last October.

In each case the respondents were asked, “When thinking about increasing Orange County’s water supply, do you think ocean desalination is a good idea or a bad idea?”

Sixty-three percent is still a landslide of public support for ocean desalination, but that support might not all be transferable to MWDOC’s two ocean desalination projects, which the 500 voters weren’t asked about.

In fact, there may be a lot of leverage for critics of the Poseidon and Dana Point desalination proposals provided by the questions that, so far, pollsters haven’t asked the public.

MWDOC Director Larry Dick, a stalwart supporter of both projects and ocean desalination in general, may have unintentionally revealed that opening at a Nov. 21 board meeting after the poll’s presenter, John Lewis, explained that seniors, at 75 percent, were more likely than any other group to believe that ocean desalination was a good idea.

Dick asked Lewis if, “The seniors who are so in favor of desalination—are they aware of how much it is going to cost versus other things [water supply sources]?”

“No,” Lewis answered, adding that obtaining an in-depth look at voter sentiments would require asking questions that add the necessary information.

Like, “Would you feel the same way if you knew it was going to cost 40 percent more?”

“Exactly,” Lewis said.

Photo, top right: Mobile testing facility for Dana Point ocean desalination project. Courtesy MWDOC

By John Earl
Surf City Voice

What is the future of seawater desalination in California?

As of 2006, 22 desalination plants had been proposed for construction along the California coast between San Rafael in the north to Carlsbad in the south. Today, only nine projects are still in the running, and even those are on shaky ground, according to an analysis by the Desal Response Group, a statewide organization generally opposed to ocean desalination.

Critics of ocean desalination (desal) say that the water industry’s dream — shared with evangelical zeal by a growing cabal of public water officials — of sprinkling the coast with desalination plants is dead in the water.

As proof, they point to spiraling costs, lack of financing, stalled technology, and higher than average water supplies after the end of the California “drought.” They say that there are underutilized and much more cost-efficient alternatives such as conservation, increased water collection and waste water recycling – minus seawater desal’s high environmental costs.

That’s why desal critics are upset after a June 6 vote by the Municipal Water District of Orange County (MWDOC) to send a letter to its umbrella agency, the Metropolitan Water District of Los Angeles County (MET), to request $350 million in funding support for the Huntington Beach Desalination Project that Poseidon Resources Inc. wants to build on Pacific Coast Highway and Newland Avenue.

At an estimated construction cost of $700 (according to a recent Costal Commission analysis), the plant would produce 50 million gallons a day or 56,000 acre feet per year of drinking water, 8 percent of Orange County’s supply. The plant would share the seawater intake pipes currently used for cooling by the AES power generating plant.

Poseidon wants to build a nearly identical desal plant in Carlsbad in San Diego County.

The proposed taxpayer-funded subsidy, says the letter, which was written June 23 and obtained by the Voice, would help MWDOC’s agencies to “defray” the high cost of desalinated water—which is generally two to four times higher than other sources.

The subsidy would go through MWDOC’s agencies which would in turn pay it directly to Poseidon over 25 years at $14 million per year in return for water delivered.

Largely funded by taxpayers outside of Orange County who won’t use the water, the subsidy would artificially lower the cost of Poseidon’s desalinated water, which would still probably not be competitive with the cost of water from other sources, including imported water. Desal advocates say that technological improvements for desalination and rising costs of imported water will cause prices to crisscross in the near future, but those improvements show no signs of arriving soon, if ever.

A pro-industry report published in 2004 by the federal government concluded that the invention of cost effective desal technology would require a huge influx of government subsidies to fund the research and development that the industry is lax in doing itself. Even then, it would take over 20 years to make seawater desal competitive, the report estimated.

Without huge public subsidies, Poseidon cannot attract the private investors and get permission to pass tax free bonds also needed to finance the construction of its Huntington Beach plant. To the point, without subsidies—and based on past experience $350 million would not be nearly enough—Poseidon’s HB plant will be out of business.

That is exactly the scenario that played out last year for Poseidon’s proposed desalination plant at Carlsbad in San Diego County. It would be nearly identical in size and type and has received all of the necessary permits but stalled due to lack of financing and increased cost projections for the price of its water.

As reported last June by the Voice, a memo from the city manager Peter A. Weiss of Oceanside, one of nine water San Diego County agencies that had signed water purchasing agreements with Poseidon at that time, pointed out that Poseidon would need $630 million in government financial assistance.

Poseidon's VP Scott Maloni says the debate is over. Photo: Arturo Tolenttino

“In the past few months it has become apparent that Poseidon’s cost of water is going to be greater than originally proposed,” Weiss wrote. “To make the project viable, Poseidon needs subsidies from the San Diego County Water Authority (CWA) and Metropolitan Water District.”

But $630 million was too much money and a lawsuit filed by the city of Carlsbad against the MET had effectively canceled the larger of the two subsidies anyway. So the CWA decided that the only way to keep the project alive was by spreading the costs to all 26 of its member water agencies rather than the original nine with options to buy the desal plant from Poseidon later on.

That’s exactly the same arrangement that MWDOC will seek for the Huntington Beach plant, according to MWDOC’s General Manager, Kevin Hunt.

With MET’s subsidy to the CWA now off the books, Hunt decided that now is a good time for MWDOC to put a claim on the $350 million on behalf of its 28 agencies. So far, not a single one of them has signed on to buy Poseidon’s water, but Hunt believes that, since the MET will be looking at budget priorities next year, now is a good time to make the request.

The subsidy has always been the 1,000 pound gorilla in the room, although previous Huntington Beach city councils and the mainstream media chose to ignore it. But after years of project delays that were mostly self inflicted, and as the time comes for Poseidon to fish or cut bait, the company’s appetite for public assistance can no longer be hidden and has become a sore spot for the god of the sea.

But before voting to approve and mail the letter that it had not read, the board gave instructions to spin the subsidy from the publicly financed project that it is into the 100 percent privately funded project that Poseidon and supporters have always bragged it is.

Director Brett Barbre, representing parts of northern Orange County, started the impromptu skit, asking Hunt:

Does the $250 [per acre foot] go to Poseidon?

Hunt: No.

Barbre: Or does it go to the water district?

Hunt: The $250 goes to the water authority and its member agencies.

Barbre: Those that are actually purchasing the water?

Hunt: Whenever there is a subsidy, it goes to the public agency, not to the –

Barbre: It’s a big distinction.

Member Susan Hinman from south Orange County wanted and received assurance that Barbre’s spin would be applied to the letter before it was sent. “I feel uncomfortable about this,” she said. “I don’t see a copy of the letter and is there any reason why this can’t be delayed until the next committee meeting with a copy of the letter with the wording that you’re expressing,” she asked Hunt.

But Hunt’s other reason for rushing the letter through is to help Poseidon, which is years behind in answering basic questions put to it by the Coastal Commission, to “get the ball rolling.” Three to six months more for needed staff meetings with the MET would occur before the issue is placed on the agenda for vote, Hunt said.

Jack Foley, MWDOC’s appointed representative to the MET, concurred with the need to create confidence in Poseidon’s project by showing the Coastal Commission and investors that the company’s Surf City desal plant “has a real future” with actual water to sell.

When challenged on the real reason for the subsidy—to attract construction money—Foley stuck to the official story, that it will merely assure investors that there is a buyer for the project over the long term, denying the board’s own admission (in its soon to be sent letter) that the money was needed to defray the [highly uncompetitive] cost of Poseidon’s water.

The subsidy’s true purpose has been an open secret for a decade, but a report last year by the DC Bureau – based on interviews with government and Poseidon officials – spelled out in detail how the previously approved but now revoked subsidy for Poseidon’s identical Carlsbad desal project would have directly benefited the company by reimbursing it, at the company’s request, for construction costs plus interest.

Of course, Poseidon vice president Scott Maloni, who was at the meeting, still boasts that the HB desal plant is a privately funded project and is badly needed by the people of Orange County as part of a larger water portfolio – assertions that Orange County water officials accept as articles of faith.

“I feel like these folks are reopening old debates that have been solved years ago and it’s nothing to do with what’s on the table today,” Maloni told the board, responding to audience members, including this reporter, who challenged his assumptions. “They know that the project is needed…There’s no debate about whether the project is needed. And there’s no debate about how the MET subsidy works.”

In the second and final part of Dead in the Water on Wednesday: Is Poseidon’s proposed Huntington Beach desalination plant needed?

By Ian Douglas
Special to the Surf City Voice

Australians are battling to come to terms with the impacts of the oft-criticized process of national water reform. The ongoing, abrasive debate surrounding the Basin Plan being drafted by the Murray-Darling Basin Authority, outrage over the spiraling costs of currently redundant desalination plants and public protests about sky-rocketing water charges typify the predicament.

Australian water reform was conceived in 1994 by the Council of Australian Governments; nurtured by the prevailing mantra that free-market exposure was the ultimate panacea for undercapitalized and inefficient public utilities. COAG went one giant leap further, in deciding to establish a national water market; arguing that this would direct water to its most productive use.

In the years since these sweeping changes were announced, the wisdom of applying free market principles to the management of an essential natural resource has been largely discredited by events overseas: In the water-supply sector, major corporate players have been accused and, in more than a few instances, convicted of price-gouging, anti-competitive behavior, corrupt practice and fraud. On all continents there are moves to wrest control from private corporations. Globally, more than 90 per cent of water services are now publicly owned.

In Australia there are valid concerns that water reform is leaving crucial decisions, with respect to the “where”, “when” and “how” of water distribution, in the hands of entities whose priority is profit rather than socially and environmentally responsible water use. Questions are being raised as to why our governments have been prepared to implement these radical policies without seeking and obtaining prior electoral mandate and in the absence of adequate constitutional protection of water.

The unbundling of water rights from land title has been the lynchpin of water reform, enabling water entitlements to be leased, treated as equity, bequeathed or permanently traded. In less than three years’ time, there will be no limit on the volume of water access entitlements that can be traded permanently between hydrologically connected irrigation districts anywhere in Australia.

Australian water is now effectively commoditized: allocated to whoever is willing to pay the going price. The market cares not whether you intend to drip-irrigate vegetables, cultivate cotton by flood irrigation, water golf courses – or merely hold your allocation as an investment for a rainy, or not so rainy, day. We are told that water trading will promote the allocation of water to “high value” uses, but the concept of “value” is far from precise. Large-scale agribusiness enterprises may reap high returns from the water they are well positioned to acquire, but their profits are largely internalized, increasingly to overseas interests, minimizing benefit to local communities.  More traditional farming may result in lower profit at the farm gate, but is believed to have a more marked flow-on effect on local economies.

In 2008-9, water trades totalled 2.74 billion dollars. In the same year, whilst urban water users faced severe restrictions, water use for irrigated agriculture increased 3 per cent on the previous year, but the gross value of production from irrigation fell by 358 million dollars.In that year, following localised inflows into the northern Darling catchment, but whilst the vast majority of the Basin was enduring the peak of the worst drought in living memory, the cultivation of cotton and rice consumed 981 gigalitres of water.

This figure equates to the combined water consumption of Sydney, Melbourne and Adelaide (990 gigalitres) over the same period, to produce a crop with a combined value of less than 650 million dollars, in a year when the gross value of national agricultural production was in excess of $46 billion.

In consuming around 850 gigalitres of water, 23 per cent of the total volume diverted for irrigation in the Murray-Darling Basin, the 2008-9 cotton crop contributed only 4 per cent to the total value of agricultural production in the Basin. Our self-sufficiency in terms of food production also suffered: while the value of the cotton crop increased by 198 per cent over the previous year, irrigated vegetable production fell by over 350 million dollars.

Sen. Lou Correa cuddles up to Poseidon CEO Scott Maloni to support desalination plant in Huntington Beach. Photo Arturo Tolenttino for SCV.

Unrestrained exploitation effectively hamstrung the Murray-Darling Basin Authority, and its predecessor the Murray-Darling Basin Commission, in its statutory responsibility to manage the Basin’s water resources in the national interest, and dramatically impaired the inherent ability of the Murray-Darling river system to resist the effects of prolonged drought.

In 2005, Wendy Craik, Chief Executive of the Murray-Darling Basin Commission, confirmed the impotence of her organisation admitting, “We just have to hope it pours with rain”. Two years later, then Prime Minister, John Howard, refusing to deviate from market-based water management and resisting calls to invoke emergency powers, urged the nation to pray for rain. For eight long years, the nation’s most vital river was not allowed to flow to the sea.

The water market conspicuously failed to live up to the expectations of the National Water Initiative, driving down water storages in the Murray-Darling Basin to critically low levels at a time when conservation should have been paramount. The dire consequences for the environment, communities and economy of the Basin were clear for all to see.

In recent months, the raft of resignations from the Murray-Darling Basin Authority – including both the Chair and CEO – the distancing of recently appointed Chair and the Federal Water Minister from the Guide to the Draft Basin Plan, and the current Senate Inquiry into the Provisions of the 2007 Water Act, are further indications of the resolve of proponents of market-driven water reform.

The pressure being exerted by pro-marketeers was reconfirmed just last week, with the disclosure that the Authority is expected to recommend a paltry 2,800 gigalitre increase in environmental water allocation; prompting the Wentworth Group of Concerned Scientists to pull out of the Basin Plan consultation process, stating that it did not wish to be associated with an initiative which was destined to fail and waste billions of dollars.

The number of offshore players active in Australia’s water market bears testament to the rich pickings to be made speculating on the nation’s water reserves. It is believed than around 300 million dollars worth of water licences are currently in the hands of investors and this amount is steadily increasing. However it is impossible to confirm the precise figure: the National Water Commission has advised Fair Water Use that the Water Act prohibits public access to details on water entitlement holders.

Unlike the majority of our traditional farmers, investors are typically guided by global market trends and not merely the prevailing cost of Australian water. There are genuine concerns that, as more speculators, multinational agribusinesses and financial institutions enter the market, the inherent variability in water prices will be potentiated, particularly during drought; threatening the viability of previously profitable rural businesses and increasing pressure on rural communities.

The website of one such organization, US-based, Summit Global Management, contains the following observation: “Water is the most essential life-sustaining substance on earth and the most critical industrial input to the world’s economy. Demand for clean water has expanded unrelentingly as populations soar and societies modernize, and we now face crisis-level shortages for this most basic and necessary resource.”

In 2009, Summit Global’s chief marketing officer, Matt Dickerson, famously stated “There are few areas where we can execute our strategy, but Australia is one of them”. Summit, which in 2009 acquired at least 20 million dollars worth of permanent entitlements to Australian water, last month announced, through its Adelaide-based agent Blue Sky Water Partners, that it is seeking an additional 100 million dollars worth of water rights, focused on main systems such as the Murray-Darling.

In 2010, Australian-based Causeway Asset Management commenced a global drive to raise 100 million dollars of investment capital, to be used to acquire permanent entitlements to Murray-Darling water, stating: “There is a chronic supply/demand imbalance for Australian water which will result in higher water prices. Owning Australian Water Entitlements provides investors with direct exposure to water prices”.

It is clear that such investors are targeting the high returns to be made under leaseback arrangements during periods of water scarcity – an all too regular occurrence in this country. Where is the fundamental national benefit of exposing our water to such activity? What will be the impacts on the farming community, public water supplies and the environment?

In a statement on urban water policy released last month, the Chair of the National Water Commission, the statutory body responsible for driving the process of water reform, urged further deregulation and the construction of more desalination plants and dams – but tellingly made no mention of initiatives to reduce consumption in a country which, in 2004, was rated as the third largest per capita user of water in the world.

This blind commitment to growth, which also suffuses the policy platforms of the major parties, is being used to justify public-private partnerships and the construction of ill-conceived and untenably costly water infrastructure, most notoriously desalination plants. Our governments appear quite comfortable entering into public-private partnerships with multinationals whose track record in terms of corporate responsibility on the global stage is, at best, in-glorious.

In July last year, the Water Services Association projected that increased urban water consumption through to 2025, as a result of a 47 per cent hike in Australia’s population, to 31 million, could largely be met by the combined output of existing desalination plants and those currently under construction. Australians continue to be massaged into accepting this high tech, but inefficient and environmentally toxic industry; governments insisting that desalination is necessary to ensure water security, whilst largely ignoring the potential of “greener” and more efficient alternatives.

It is highly significant that the Productivity Commission itself has recently criticized the move towards desalination plants on economic grounds alone, irrespective of the environmental costs.

Following the change of government in Victoria, it has been revealed that the water bills of Victorian households are set to double over the next five years, as a direct result of costs associated with the Wonthaggi desalination plant. Irrespective of whether the plant is required to operate, Victorian taxpayers face a bill of close to 20 billion dollars over the next thirty years. When former premier Steve Bracks first announced the plant in June 2007, Victorians were informed that it would cost $3.1 billion.

In December last year, the South Australian Water Minister, Paul Caica, confirmed that operational costs of the Port Stanvac desalination plant are projected to total $130 million per year. This figure is additional to construction costs of $1.8 billion. It bears stating that the Government could currently acquire permanent water licenses for 100 gigalitres, the maximum output of the plant, for around $150 million.

In attempts to stave-off persistent criticism of “white-elephant” infrastructure, it is probable that conservation of urban water supplies will continue to be a low government priority, other than during periods of severe drought.

Last year, Mr Caica was also quoted as stating, “I have always said that we will consider lifting the restrictions when the desal plant comes online”.

In 2007, the value of state-owned water assets was estimated at 70 billion dollars: clearly a major temptation for state-governments seeking to balance their budgets.

Nationwide, the corporatization of water utilities has resulted in price hikes and an accent on fixed rather than consumption-based charging; stimulating concerted public protests, such as those currently taking place in south-east Queensland, amid fears that corporatization is a precursor to privatization.

To date, South Australia is the only state to have dabbled with privatization of water supplies – and Adelaide consumers have literally been paying the price: last year the State Government announced that it would not be renewing its contract with United Water, a wholly owned subsidiary of Paris-based, water colossus Veolia Environment, due to allegations of over-charging, to the tune of tens of millions of dollars. Nonetheless, publications such as that released by Deloittes in March 2010 seem to be priming Australians for the progressive sell-off of public water utilities.

It bears repeating that the stated aim of water reform is “to implement a strategic framework to achieve an efficient and sustainable water industry“: but on whose terms? – and to whose benefit?

Despite the fact that polling has indicated that at least 70% of Australians are opposed to it, water privatization is being imposed on the nation, under the guise of water reform; as a result of a closed-door agreement made, nearly twenty years ago, by the then Prime Minister, State Premiers, Territory Chief Ministers and the President of the Australian Local Government Association.

Water reform need not and should not equate to privatization, a process largely incompatible with the protection of water as a public good. Australians have the right to indicate which path they wish to follow, via state-by-state plebiscite if necessary.

Free-trade agreements, which have laid out the welcome mat to overseas speculators, should be renegotiated or scrapped, at least insofar as they apply to water.  This is consistent with data released by the Productivity Commission last month revealing that the benefits of free-trade agreements are oversold, creating unrealistic expectations and resulting in only small increases in national income.

Socially responsible water reform cannot proceed in the absence of sound legislated protection of water as a common good.  In 2009, the High Court of Australia found that there was “a common law notion that water, like light and air, is common property not especially amenable to private ownership and best vested in a sovereign state”. First drafted over a century ago, our Constitution does not refer to water rights other than related in very general terms to navigation, conservation and irrigation. Section 100 requires amendment if the nation’s water is to be adequately protected in the 21^st century and beyond.

Irrespective of whether the 1994 vintage of COAG had a full understanding of the implications of its decision, sincere governments would now admit that water reform is privatizing an all-too-finite and easily abused natural resource – and, by so-doing, poses a serious threat to Australia’s water future.

Ian Douglas is national coordinator of Fair Water Use (Australia). He is currently national coordinator of Fair Water Use (Australia), an independent and national lobby group, formed in early 2008 by Australians who share the vision of a revived Murray-Darling basin and the sustainable environmental, community and economic benefits that would flow from its recovery.

By David Rosenfeld
Courtesy of DC Bureau
Thursday, 03 March 2011

California is in the process of building a series of massive ocean desalination plants on a scale not seen before in the United States. While most are at various stages, slowly slogging through bureaucratic red tape, conservationists are pushing back against powerful interests betting California’s looming water crisis occurs sooner rather than later.

Opponents argue the technology is too expensive and damaging to the environment while the state could do a lot more to conserve water at the tap and in the fields where most of California’s expensive imported water ends up. Skeptics also see in desalination a potential boondoggle where the public bears the risk and Wall Street investors reap the benefits.

“We should be doing a lot more in terms of water saving before we go into desalination,” said California Coastal Commission chairwoman Sara Wan.

“Most likely, given the population we have, we’re going to eventually need to do desalination for water,” Wan said. “There are ways to do it that are less damaging and ways that cause significant impact.”

There are now about 20 full-scale proposals for desalination plants – with several smaller facilities already up and running – from San Francisco to San Diego that would turn the salty waters of the Pacific into drinkable tap water. Some plan to draw brackish water through ground wells, while most want to draw millions of gallons of seawater each day through the same in-take pipes that power plants must phase out in 15 years.

Like the power plants, desalination plants have the potential to entrap sea lions, millions of fish and other marine life. The industry says it is reducing harm with newer technologies such as wedge-wire screens, but much depends on location. Wan voted against a large-scale plant in Carlsbad because it would destroy sea life in a nearby estuary, but she supported a plant in Monterey that plans to draw water through near-shore wells. Neither facility is built yet, though both could break ground this year, marking the first large-scale desalination plants in the state.

There are problems too with desalination’s byproduct, the heavy concentrates of salt and the remains of other chemicals that could be dumped into the ocean.

Desalination also has a massive carbon footprint. For the most common type of ocean desalination method called reverse osmosis, which pushes water through membranes, some 40 percent of the operating cost is electricity to power the plant.

The $700 million proposed plant in Carlsbad by investor-owned Poseidon Resources expects to satisfy around 8 percent of San Diego County’s water supply while at the same time consuming as much electricity as 45,000 homes. Greenhouse gas emissions would total about 200 million pounds a year, according to the project’s environmental impact assessment.

Advocates say the technology is becoming more efficient by re-capturing energy and using renewable resources as much as possible. But it is a lot to overcome.

Drawing water
Most of what the state knows about ocean water in-take pipes comes from the impact of 19 coastal power plants. In 2009, the State Water Resources Control Board ordered those plants to phase-out the use of surface water in-take pipes for cooling their red-hot equipment, the sole reason they are located on the coast in the first place. The state’s governing body on water determined those in-take pipes kill 9 million fish, 57 sea lions and other marine life each year.

Sen. Lou Correa joins Poseidon CEO Scott Maloni to support desalination plant in Huntington Beach. Photo Arturo Tolenttino for SCV.

But those orders do not apply to desalination plants, which expect to use many of those same pipes, often at equal capacity, long after power plants are barred from doing so.

“The effects are the same if you’re drawing in seawater for desalination or power plants,” said Tom Luster, an analyst with the California Coastal Commission. “You’re killing essentially 100 percent of marine life, larva and fish eggs.”

Poseidon’s Carlsbad plant and another the company plans to build in Huntington Beach call for using the same surface water in-take pipes used by the local power plants there now.

“That just exacerbates the problem in our mind,” said Joe Geever, a spokesman for Surfrider Foundation, which along with other conservation groups has filed appeals and lawsuits against both facilities. “If you’re going to protect marine life, you have to protect it from all of these industrial in-takes.”

The Carlsbad plant would draw about 300 million gallons of seawater per day from a nearby lagoon and produce roughly 50 million gallons of drinkable tap water.

An environmental impact assessment performed by biologists determined the screens would destroy enough marine life equal to 66 acres of ocean productivity. To compensate for the impacts, Poseidon agreed to restore 66 acres of wetlands in the San Diego bay area and spend more than $60 million on carbon offsets.
 
Ironically, the state order against ocean-cooled power plants will diminish their capacity, industry experts predict, just as desalination is coming on the scene, which requires huge amounts of electricity.

The water sector already accounts for 20 percent of the state’s energy use, and desalination will only make it greater.

Despite the drawbacks, desalination has gained widespread support among California lawmakers and elected water officials who have pledged hundreds of millions of dollars in taxpayer subsidies.

Most of the projects would not be possible without tax-exempt bonds and direct subsidies beginning with California’s $3.4 billion Proposition 50 passed in 2002. It provided $50 million to support 48 desalination projects including research and development, pilot projects and feasibility studies from 2004 to 2006. The years following brought increased support as private companies stepped in to build some of the largest public infrastructure projects in the state’s history.

“Desalination is not the solution. But for some agencies it’s part of the solution,” said Paul Shoenberger, general manager of Mesa Consolidated Water in Costa Mesa.  Shoenberger also heads CalDesal, a newly formed pro-desal lobbying group made up of public water agencies and private water companies.

“With water being so critical these days, we shouldn’t be taking any options off the table, and I don’t think we should be pursing only one option,” he said.

According to backers, California faces a looming water crisis that could make the sky-high price of desalinated water today seem like a bargain in as little as 10 years. In fact, dozens of companies, many in the San Diego area, have millions of dollars riding on it.

“They are not just hoping,” said Glenn Pruim, utilities director for Carlsbad Regional Water District, about Poseidon. “They have it locked up in agreements.”

Two-thirds of Southern California tap water and most of the water irrigating California’s rich farmland arrives courtesy of an aqueduct system hundreds of miles long from the Colorado River to the east and the San Joaquin basin in the north. But those reserves are running low, and they threaten endangered species, which could potentially dramatically increase consumer water prices.

California’s population, meanwhile, could reach 60 million by 2050 from around 37 million in 2009, according to the state’s Department of Finance.

“You can ask anyone in the water industry,” said Noelle Collins, spokeswoman for the West Basin Municipal Water District, which supplies water to parts of Los Angeles County. “Everyone has said you can’t conserve your way out of this crisis.”

But analysts at the Pacific Institute, based in Oakland, say California farms and households could do a lot more to conserve water.

In parts of Southern California, up to 70 percent of all household water is used outdoors, mostly to water lawns, and an estimated 1.3 billion gallons of wastewater drains into the ocean each year.

In California, per capita water use still hovered around 176 gallons per day in 2005, according to the latest estimates by the State Water Resources Control Board.

By contrast, in Australia where ocean desalination plants are up and running in nearly every major city along the coast, consumers reduced their water use to about 40 gallons per day before turning to the costly alternative.

A 2003 report by the Pacific Institute found California could save up to 30 percent of its residential water measured in 2000 mostly by imposing national plumbing code standards established in 1992. Those standards call for low-flow toilets and showerheads and more efficient clothes washers – far less expensive steps than multi-million dollar desalination plants. Other options such as rain barrels, cisterns and native landscapes also help reduce demand. “These are by no means cutting edge technologies,” said Heather Cooley, a Pacific Institute policy analyst.

Another study in 2009 found that California farmers, who receive 70 percent of the state’s overall water supply, could save up to 16 percent – around 5 million acre-feet per year – by adjusting irrigation techniques.

“That’s water you wouldn’t have to withdraw in the first place,” said Cooley, adding that the changes would be greatest in dry months and would also result in healthier plants and less fertilizers and pesticides. “It does suggest that it’s a very effective mechanism for dealing with drought and, in the long run, helping us address climate change.”

In 2009, California passed a state water plan to conserve 20 percent by 2020. The law provides greater incentives for farmers to conserve water, but experts say it won’t be enough.

“There are certainly a lot of barriers to conservation and efficiency. One of them is the low price of water,” Cooley said.

Unlike consumer prices, agricultural water prices are less affected by shortages. Contracts are often set for years at a time and the costs are even more subsidized than residential systems. The new law will require water agencies to measure how much water farmers are using, but it will not enforce any conservation standards.

Sporadic reports in recent years of California farmers letting their fields lay fallow often has more to do with water being cut off due to drought rather than the price of water becoming too high.

Ocean desalination is one way to relieve water pressure on California agriculture, said Shoenberger, who heads CalDesal.

“With an increase in population and increase in water needs in California, desalination is a great potential alternative along with the others for getting local water that’s clean, safe and reliable,” Shoenberger said. “A lot of the inland and agriculture areas would love to see urban California reducing their reliance on the Delta and the inland streams.”

In many cases, conservation has relieved the pressure to build expensive desalination plants where experts realize they are not needed, but supporters say those efforts are running out of steam.

In greater Los Angeles County, water consumption has dropped 15 percent in the past year, according to the West Basin Municipal Water District. The district imports two-thirds of its water today, which it wants to cut in half by 2020. It  also manages a water recycling facility in El Segundo that turns wastewater into 30 million gallons of fresh water daily.

Much of that conservation and reuse came through programs sponsored by the Metropolitan Water District of Southern California, which manages the flow of imported water.

On January 26, Metropolitan reduced its conservation budget to just $10 million – about 1 percent of its total budget – for the coming fiscal year beginning in July. Last year, the southern California water agency spent about $20 million and the year before roughly $54 million in conservation rebates.

The agency, meanwhile, has pledged nearly bottomless funding to water districts with working desalination plants. A report by the Public Education Center’s DCBureau.org published last year analyzed how these incentive funds amounted to taxpayer subsidies.

Metropolitan has already committed up to $350 million over 25 years to Carlsbad – given the plant produces as planned – and a virtual blank check for additional plants to come. The incentive amounts to $250 per acre-foot of fresh water produced.

“We spent hundreds of millions of dollars on conservation and recycling projects,” said Bob Muir, Metropolitan spokesman. “We conserve and recycle and cleanup groundwater that produces more than a million acre-feet of water per year. That’s more than the water used by cities of Los Angeles, San Diego and the San Francisco Bay area.”

West Basin water officials, like many others along the coast, are looking to spend hundreds of millions of dollars on a desalination plant to supplement around 10 percent of the region’s water needs. The district has already spent more than $21 million on two pilot projects over the past 10 years.

At a demonstration plant in Redondo Beach opened in October, visitors can see an underwater video of fish swimming past the in-take pipes and educational displays about making desalination more feasible. Yet, according to West Basin, plans for a full-scale plant are still undecided. Collins said the district wants a plant capable of producing 20 million gallons per day, but a location has not been chosen.

“We want to double our recycling and conservation and add a little bit of ocean desal,” said Collins, adding the district would own the plant while contracting major functions.  

Desalination is not new in California. Any water reuse facility or groundwater remediation likely uses the same technology. And even large-scale plants were considered periodically in decades past.

Several efforts failed to materialize. Others were built but rarely needed. In 1998, Santa Barbara built a desalination plant, which now sits idle because it is too expensive. Recent desalination proposals, too, have been temporary shelved as conservation measures are paying off.

Proposed plants in Santa Cruz and San Luis Obispo are being questioned. In Long Beach, where local officials have been considering a desalination plant, conservation steps have brought per capita water consumption down to about 100 gallons per day.

“It’s not making as much sense to them now,” said Conner Everts, director of the Desal Response Group opposed to desalination. “There’s no sense of priorities. They just don’t make sense to run. I’ve been working on water issues for 30 years. I’ve watched our per capita use slowly drop. And we know we aren’t capturing and re-using as much as we should.”

The price of desalinated water varies depending largely on the cost of energy. It can average double or even quadruple the current price counties and cities pay for imported water in California. As desalination gets more efficient and the price of water keeps rising, supporters say those price lines will eventually cross. Wherever they cross, the price will be high.

On the Monterey peninsula where a $400 million desalination plant recently won final approval, residents there could be the first to feel the effects financially. The Public Utilities Commission has approved a plan to allow publicly traded California American Water to potentially quadruple water bills on 40,000 ratepayers in order to pay for the proposed plant. There is disagreement, however, over the exact effect on rates with the PUC arguing much less.
 
California American supplies around 40,000 ratepayers with tap water. Most of that water comes from the Carmel River.

“We’re pretty close to the bone on water conservation,” said Andy Bell of the Monterey Peninsula Water Management District, which issues water permits on the Carmel River. Indeed, the region has some of the lowest water use per capita in the state at around 70 gallons per day.

Beginning in 1995, the State Water Resources Control Board ordered the reduction in the amount of water it withdrew from the Carmel River by 70 percent by 2016 because of endangered steelhead. A ballot measure to build a damn was defeated later that year. Since then, efforts have turned to conservation and desalination.

When the desalination plant is completed, likely in several years, the Marina Coast Water District will own the plant while Cal-Am will purchase the water and pass the costs onto ratepayers. The Public Utilities Commission says consumers could pay up to 63 percent more for water, but a division within the PUC charged with representing ratepayers estimates the agreement could lock consumers into paying four times their current amount. The plant should produce around 10 million gallons of drinkable water per day when it is up and running.

Diana Brooks, with the Division of Ratepayer Advocates, said the division opposed the water purchase agreement approved by the PUC last year because it lacked meaningful cost controls.

“In this case you have a private water company contracting with two public agencies to deliver water and they have no ability to absorb any risk,” Brooks said. “If there are any risks or the project doesn’t work right, all the risk passes right back through to the customers.”

The PUC also granted Cal-Am the ability to pass through in its rates the costs of attorney fees up to $4.3 million, including the costs of fighting appeals by the Division of Ratepayer Advocates.

“So we’re representing the customers but the customers had to pay for the company’s attorney costs,” Brooks said.

Catherine Bowie with Cal-Am disagreed with Brooks’ assessment. “There is multiple cost controls in the water purchase agreement,” she said. “The facility is being developed by public agencies, so there will be every effort to go after the lowest costs. We have a number of provisions that deal with the management of the project. There is an independent analysis of financing and value engineering through design and construction. I absolutely think there are guarantees of cost control.”

Bowie said that after six years (an application with the PUC was originally filed in 2004) the area was ready to finalize its plans. “We have been in need of a new water supply here since the 1970s, and we are finally developing a solution to this problem,” Bowie said. 

Photo top right: Arturo Tolenttino, Surf City Voice

DC Bureau is staffed by award-winning journalists dedicated to bringing you in-depth stories covering the Environment and National Security.

By David Rosenfeld
DC Bureau
Tuesday, 08 March 2011 

For the scores of businesses in Southern California already supplying desalination equipment around the globe, California’s impending water crisis spells opportunity.

An estimated 3,000 people work for companies in the San Diego area supplying equipment or logistical support for desalination plants, earning the industry upwards of $350 million in annual revenues.

A key element of their business also supplies facilities that re-use and recycle water using similar technology including the membranes that make up the heart of any ocean desalination plant.

“It’s a big industry,” said Tom Pankratz, who writes about desalination for Global Water Report and consults for various water agencies. “A lot of companies that make stuff for desalination plants also make stuff for power plants and automobile plants. There are a lot of major multi-national corporations that have desalination subsidiaries.”

Some of the biggest companies include General Electric, Dow Chemical, Acciona Aqua, Toray Membrane, Veolia Water Solutions and Hydronautics.

About 20 ocean desalination plants up and down the cost of California – most in the early planning stages – have stirred debate over whether adopting such an expensive technology with large environmental impacts is worth it.

Most of the world’s 2,000 desalination plants are currently located in the Middle East where water is in short supply but energy is cheap. In California, an estimated 40 percent of the cost of desalination is energy to run the plant.

Lobbying by companies that stand to gain financially from desalination has helped earn widespread support from California lawmakers, including strong backing from former Gov. Arnold Schwarzenegger.

In 2007, Schwarzenegger aligned with a group of nearly two-dozen lawmakers – local and statewide – supporting a proposed plant in Carlsbad by investor-owned Poseidon Resources. In a signed letter they urged the California Coastal Commission to approve the Poseidon project “on its first opportunity.”

In November of that year, the commission voted 9-to-3 in favor of the project even though Commission staff said Poseidon failed to provide complete information. 

Since 2000, Poseidon has spent nearly $1 million lobbying the California legislature and other elected officials that oversee the state’s intricate water supply. All told, Poseidon has reportedly spent around $60 million on engineering and attorney fees on its Carlsbad plant before a single spade of dirt has been overturned.

“Poseidon is very well connected,” said Glenn Pruim, Carlsbad public works director. “That’s one thing they’ve done very well is to make contacts in the industry whether it be politically or legally. They’ve been very successful in fighting off lawsuits against their project.”

In 2008, executive director of the California Energy Commission, Melissa Jones, abruptly changed positions on the Carlsbad project. First she wrote to the Coastal Commission that the project contained “several fundamental errors.” Eleven days later, Jones wrote to retract her comments. She said she had met with Poseidon representatives and concluded “the project and the plan for mitigation are laudable.”

Proposed desalination plants must also win approval from city and county governments as well as the Public Utilities Commission in the case of investor-owned utilities. First and foremost, however, desalination must win the nod from water agency officials, which, in large part, they have succeeded in doing.

A group of California water companies and public agencies formed the non-profit CalDesal last year to educate and lobby for desalination. So far the group has collected around $100,000 in membership dues, said Paul Shoenberger, general manager of Mesa Consolidated Water District in Costa Mesa. The group recently hired as executive director Ron Davis, former legislative director of the Association of California Water Agencies.

“Our main purpose is to promote environmentally friendly desalination in California,” Shoenberger said.

The desalination message also reaches water officials through sponsored conferences, such as the annual ACWA meeting. Public records indicate today’s West Basin board members attend annual conferences of the New Water Supply Coalition, which lobbies nationally for desalination, and the American Membrane Technology Association, representing companies integral to desalination plants.

The International Desalination Association plans to hold conferences this year in Dubai, Algiers, China and Antigua. Global Water Intelligence also convenes seminars around the world. At last year’s conference in Paris, event organizers tried to pay the airfare for a San Diego County Water Authority official to accept an award for public utility of the year.

“The legal departments said they couldn’t do it and don’t have a budget to pay themselves,” said Pankratz, who helped organize the conference.

But officials frequently travel overseas to see existing plants. Last year, Pankratz helped West Basin water officials travel to Australia – paid by the district – to see an ocean desalination plant in action.

“If you want to see a desalination plant that’s operating, you have to travel,” Pankratz said. “Whenever anyone is doing a new plant, the most senior engineers usually take a trip to visit some operating plant to see how it’s working.”

City councilmen sometimes go on trips, too, he said. “Most of the time the city pays for it.”

Adding to the obscure nature of California’s intricate network of water rights, water agency board meetings often operate with little oversight, said Conner Everts, director of the Desal Response Group. In 2004, two members of the West Basin Municipal Water District went to prison for accepting bribes.

Everts said the current board and the larger Metropolitan Water District of Southern California could do more to increase transparency. Projects are often approved, he said, “with little or no public scrutiny with subcommittee policy meetings and board meetings in the middle of the working day.”

The results of lobbying at the Public Utilities Commission and the California Coastal Commission are obvious. In August 2009, the Utilities Commission overruled an administrative law judge in a dispute over what California American Water could charge ratepayers for desalinated water.

A day before the ruling, company lawyers met with commission staff.

“It was a compromise,” said Diana Brooks with the Division of Ratepayer Advocates. “But on the last day before they voted on it, the commissioner changed his version of it, and adopted the settlement the way it was written.”

The settlement gave California American Water, a publicly traded company, authority to potentially quadruple water prices for desalinated water produced by a publicly owned plant.

DC Bureau is staffed by award-winning journalists dedicated to bringing you in-depth stories covering the Environment and National Security.

By Debbie Cook
Special to the Surf City Voice

Debbie Cook is the former mayor of Huntington Beach. As a member of the Huntington Beach City Council, she opposed the Poseidon desalination project proposed for the city. She served on the state’s Desalination Task Force and has written extensively on the relationship between water and energy as well as peak oil. Her articles have appeared in a wide array of publications and she is well known for her expertise on energy related issues. This is the last of three parts.

Worldwide, humans have quickly and wastefully consumed water from the cheapest sources by over-pumping aquifers and over-allocating rivers. We’ve turned to technology to eke out more but technology is not without its costs. Every remaining incremental gallon of water will come at a higher and higher price. Are we nearing a breaking point?

Prior to the 2008 run-up in oil prices, gasoline, like water, was widely believed to be inelastic–that consumption of such an essential commodity would grow despite the price. But as gasoline prices headed toward $4/gallon, discretionary spending shrank and the economy shrank.

The rising costs of essentials like food, shelter, energy, and water have a disproportionate impact on low-income households. Low-income assistance programs for water vary significantly from one jurisdiction or utility to the next. For example, in California, San Jose Water provides a 15 percent discount on the total bill while Valencia Water provides a 50 percent discount off the monthly service charge. Such programs shift the costs onto remaining consumers and businesses many of whom are also facing economic distress. Are these programs sustainable in the face of continuous water rate increases and growing economic challenges?

“A solution isn’t a solution if it isn’t affordable.”

Those were the cautionary words of Cuban energy expert Mario Avila who visited California in September of 2010. Cuba has lived through a number of energy crises. The one with which I was familiar was the oil shock that resulted from the collapse of the Soviet Union. But Mario explained that it was the lesser known electricity crisis following the 2005 hurricane season that exposed the vulnerability of their water system. Two power plants were destroyed by two storms plunging the island into relentless daily blackouts. Without electricity, water didn’t move, it could not be treated, and it could not be discharged. Castro declared an “energy revolution” and within a six-month window, thousands of “social workers” were deployed to inventory and replace every incandescent light bulb on the island and promote zero-interest loans for efficient appliances. Rather than replace the two large power plants, the nation built smaller, distributed power plants improving the resiliency of their system and restoring power and water.

Resilience should be the goal of water planners but most options that improve resilience–water harvesting, conservation, demand management– receive a tepid reception. One major reason is because water providers are paid to sell water, not conserve it. And there isn’t an ongoing assurance for funding conservation or efficiency. When budgets get tight, the conservation budget is the first to be eliminated as was done last year by Metropolitan Water District of Southern California (MWD). Ironically, while eliminating the conservation fund, MWD was approving subsidies for desalination and raising water rates because their conservation message had resulted in lower water consumption. Conservation and low tech options for reducing water demand will never compete against capital projects in the current regulatory framework.

Level the playing field
It isn’t surprising that an industry that can’t even quantify water in a consistent unit of measure (acre-feet, gallons, cubic meters, units, cubic foot), would apply different criteria to different water options. The result is a misleading comparison between options.

Here’s an example. Say a proponent tells you that the new desalination project will produce water at $1000/acre-foot. You’re told that your city is buying water from MWD for $750/acre-foot. The natural reaction will be to compare $750 to $1000. But MWDʼs actual production costs are closer to $200 of that $750 figure. That means $550 is covering their fixed costs. So even if you reduce your imported water by 10 percent, the remaining costs (including your city’s 90 percent remainder) will have to be leveled across all water purchasers. Communities that are not the recipients of the desalinated water will nevertheless be footing the bill through subsidies and cost sharing.

Similarly there has not been a fair method for comparing conservation measures to traditional water sources. For example, the cost effectiveness of rainwater tanks has traditionally been calculated by comparing the cost of installation against the savings on household bills. But this ignores the broader cost savings to the community in deferred water infrastructure, storm water infrastructure and environmental externalities like greenhouse gas emissions. When those are accounted for, rainwater harvesting is superior to desalination.

A model already exists for a regulatory framework that would address such conflicting motivations. In 1982 California became the first state to adopt an electric revenue decoupling mechanism. This gave utilities the incentive to promote conservation and efficiency because their ability to recoup their fixed costs was decoupled from the volume of their sales. In addition to decoupled rates, California has a “loading order” of energy preferences that place priority on the least expensive and most environmentally protective resources. When meeting California’s energy needs, conservation and efficiency are considered before additional generation is added.

A sustainable conservation budget would give priority to cost effective programs like water capture, drip irrigation, water recycling, low-flow devices, and water management programs that reduce demand, costs, and bring true resilience to the water sector.

Left to compete on an uneven field, conservation will remain the bastard step-child to desalination. In 2006, many communities in Australia were offering substantial rebates on water tanks. By 2007, demand was so high that prisoners were put to work building tanks. Buoyed by studies that demonstrated other options would be more cost effective than desalination, twenty-three government leaders pledged $250 million toward their goal of reaching 500,000 households. Then in 2008, with the collapsing economy and in the midst of the desalination boom, the Bligh government dismissed wide scale rollout of water tanks. Some officials sensed a threat of competition to their capital projects, going so far as to suggest the licensing of water tanks so as to enable levying taxes on rainwater collected.

Remove the rose-colored glasses
Technology has its place. But it is not magic and shouldn’t be seen as the solution to all our problems. That which is technologically feasible is not necessarily economically feasible. Desalination cannot be “greened” by utilizing solar or wind energy for its energy requirements. Not only is the scale of such a proposal enormous, it ignores the fact that all renewable energy resources are backstopped by fossil fuels. Moreover, the price of such a proposal would significantly increase the cost of desalination, exacerbating the economic problems of water pricing and availability.

Perhaps the most important lesson I have learned over the past eight years of observing the desalination/water industry is that we create our own problems. And we are stuck in a perpetual feedback loop applying fixes to yesterday’s solutions. That’s the perfect recipe for rear-ending our future. The remedy is to increase our awareness of unintended consequences and the dynamic relationships between water, the environment, and human settlements. It is a systems thinking approach that starts with a willingness to open our minds and apply critical thinking.

By Debbie Cook
Special to the Surf City Voice

Debbie Cook is the former mayor of Huntington Beach. As a member of the Huntington Beach City Council, she opposed the Poseidon desalination project proposed for the city. She served on the state’s Desalination Task Force and has written extensively on the relationship between water and energy as well as peak oil. Her articles have appeared in a wide array of publications and she is well known for her expertise on energy related issues. This is part 2 of three parts.

Everyone has skeletons in their closets, desalination is no exception. Burying them does a disservice to the millions of public dollars that have been invested. Let’s celebrate their weaknesses so that we may never repeat their mistakes. There may be many dozens of such projects, but here are a few that have experienced their share of controversy: Santa Barbara, Key West, Santa Catalina, and Yuma.

• Santa Barbara’s project was mothballed before a single drop of water was introduced into its distribution system.
• Key West built a 130 mile pipeline and implements water rationing when necessary, thus avoiding operation of its plant.
• Catalina Island hasn’t operated its plant in years, relying on price signals with water rates that are perhaps the highest in the nation. Their top water tier is over $10,000/acre-foot. In response to the utility’s rate increase request, the California Public Utilities Commission had this to say about the Catalina facility: “…for Catalina Island in 2005, desalinated water accounted for only 25 percent of total water production, but desalination accounted for approximately 70 percent of total electricity usage.” Despite repeated requests, the operator, Southern California Edison, would not divulge information about the plants operation.
• The 72mg/d Yuma desalter, constructed by the Bureau of Reclamation, was built to comply with a treaty with Mexico. It was completed in 1992, operated at 1/3 capacity for 6 months and then shut down in 1993. Other, less expensive options for treaty compliance made it unnecessary.

In addition to these projects, there are many pilot projects that litter Southern California. I’ve often wondered why every proposed project has to be preceded by a pilot project. There is one in Los Angeles County that has already expended $23 million of public money. It follows one built in Long Beach which follows one built in Carlsbad which follows one… You get the picture. It’s insane.

Go slow, include all stakeholders
Australia began its desalination building boom in 2004 amid a prolonged drought, ultimately committing $10 billion for six projects. Public participation consisted of after-the- fact review of incomplete details. Construction contracts even contain backed out details of critical information. Decisions were made at Cabinet level and one officialʼs rationale for excluding the public was that information would be “incomprehensible” to the them.

Officials further aggravated their problems by approving multiple projects that competed with each other for materials and labor. Perth, completed its first project in 2006 with the lowest projected water costs of $1677/acre-foot. Later projects came in significantly higher. The Productivity Commission, the government’s independent research and advisory body, announced in July an investigation into the financial and environmental impact of Australia’s water sector. A final report is expected in July. The number of customers seeking financial assistance has risen by 20 percent in two years. The auditor-general of Australia has estimated that the $5.7 billion Wonthaggi plant in Victoria will cost $24 billion over the life of its 28-year contract11 and water increases of 20 percent per year for five years have been recommended. The first political backlash occurred in November’s elections where the Labor party took a beating. With rain returning and reservoirs rising to normal, the Queensland/ Gold Coast Tugun plant and Victoria’s Wonghaggi plant are proposed to be placed on standby to ease the burden on ratepayers.

Assess the weak links
Energy makes up the lion’s share of the costs of producing water, whether from the reverse osmosis process or a thermal process. Like the oft reported stories of “new energy” sources, the desalination industry is constantly bragging about new technologies that have reduced the energy demands of their process. I hope they are true, but until the industry can convert those promises into lower costs, they are no better than the hype of biofuels or perpetual motion.

Despite the widespread belief that the Middle East has unlimited energy resources, both water security and energy security are a real threat to their economy and world security. How long will the Middle East, where as much as 90 percent of water is coming from ocean desalination be able to afford the luxury of desalinated water? According to some reports, water rates in Saudi Arabia cover less than half of one percent of the cost of producing desalinated water. Subsidizing water, food, and gasoline is seen as a way of sharing the country’s oil wealth. But the absence of any price signal has led to some of the highest per capita water consumption in the world, and highest greenhouse gas emissions in the world. Saudi Arabia now ranks 6th in greenhouse gas emissions, half directly attributable to desalination. Authorities are straining under the burden of water and energy demands pushed by burgeoning population growth. Despite allocating $150 billion over the next five years for power and water projects, they have been forced to abandon their goal of becoming self-sufficient in wheat production. With natural gas in short supply, the feedstock to produce electricity will continue to be oil. The irony is that oil revenues make up 90 percent of the Saudi government’s budget so every barrel diverted to water is a barrel that cannot be sold on the market to fill state coffers.

The rising costs of energy are not just impacting the cost of electricity, they impact the entire desalination supply chain: mining of materials, (e.g. 6 million pounds of titanium alone are required for the worldʼs largest desalination plant in Saudi Arabia); manufacturing and shipping of components; construction; continuous supply of chemicals that are derived from fossil fuels; maintaining equipment; and any necessary treatment for the discharged brine and chemicals. We have long assumed that water was the limiting resource for societies, but water is just the end product of a very long supply chain, with any link capable of affecting reliability.

To be continued.

By Debbie Cook
Guest Columnist

Debbie Cook is the former mayor of Huntington Beach. As a member of the Huntington Beach City Council, she opposed the Poseidon desalination project proposed for the city. She served on the state’s Desalination Task Force and has written extensively on the relationship between water and energy as well as peak oil. Her articles have appeared in a wide array of publications and she is well known for her expertise on energy related issues. This is part 1 of a three-part story.

There is powerful information waiting to be unleashed in water data. If it were set free it would force us to re-think how we use, develop, sell, transfer, and dispose of water. Rather than focusing on the miles per gallon our cars get, we might consider how much water per mile we get from that fuel. Rather than arguing over how much energy is being used to produce water, we would give credit to how much water is required to produce energy. Rather than focusing on whether our food is grown locally, we would consider how much water it took to grow that food in our locality.

For all the lip-service we give to water and its pivotal role, why is there not a U.S. Water Information Administration modeled after the U. S. Energy Information Administration? Established in 1977 as a response to the 1973 oil disruptions, the EIA “collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment.” With a budget of $111 million per year, the agency produces data and analysis free of influence from the Executive Branch. The water sector screams for such a resource.

My particular interest in water began in 2003 when I served on the California Desalination Task Force, a group appointed by the State Legislature to look into the opportunities and impediments of desalination. Data is at the heart of reaching conclusions on a technology. Where did the data come from that allowed the committee to write its findings and recommendations? Who verified the veracity of the data? Would it stand up to scrutiny? I have spent eight years chasing such questions.

Information is not easy to come by. There are over 52,000 public and private water utilities in the U.S alone operating largely in anonymity. Public utilities offer varying levels of transparency, private utilities virtually none. The desalination industry consists of over 30,000 companies producing membranes, tanks, chemicals, pipes, monitoring, design, construction, mitigation, engineering, drilling, waste management, and consulting services. Many are competitors and hold data close to the vest. Foraging through public information, industry publicity, scientific papers, and news stories produces information that is contradictory and confusing.

There are 19 desalination projects proposed for Californiaʼs coast. With billions of dollars at stake, the public deserves more clarity on financial and environmental impacts. What are the assumptions that underlie our decisions to move forward? What issues are being left unaddressed? What lessons have we missed that could inform better water planning? Water agencies may be satisfied with the industryʼs propaganda, but my research suggests they should pause and re-examine where we have been and where we are going.

Remembering the past
Desalination proponents throw out numbers that cannot be verified or replicated and those numbers are repeated by the media and government officials as if they were fact.

An article published by the Los Angeles Times on December 4, 2010 is an example.

“Although still not cheap, the cost of desalinated water has been cut by more than half since 1998, according to the U.S. Geological Survey.”

I contacted the reporter to find the source of this statement and received no reply. I searched the USGS website and found an out-of-date overview of desalination with an unsourced sentence that looked like it might be the culprit of the reporter’s “fact.”

“As of 1998, the high cost of desalination has kept it from being used more often, as it can cost over $1,000 – $2,200 per acre-foot (1992 cost basis) to desalinate seawater as compared to about $200 per acre-foot for water from normal supply sources. Desalination technology is improving and costs are falling, though, and Tampa Bay, Florida is currently desalinizing water at a cost of only $650 per acre foot.”

Thinking there might be additional data available from the USGS, I contacted them. They were unable to direct me to any reports or studies to verify the veracity of the claim that Tampa Bay is producing water at $650 an acre-foot. Most likely the figure came from the original presentations made to Tampa Bay Water over a decade ago. Price was probably the motivating factor in Tampa Bayʼs decision to construct a project, but as NOAA stated in a 2003 publication, “Time will not only tell the environmental impacts of Tampa Bay’s desalination plant, but it will also determine if it’s really producing the cheapest desalted seawater in the world.” It would be wonderful if time did tell its secrets. Unfortunately for truth seekers, time may tell but no one is listening.

Last March, according to Tampa Bayʼs General Manager, the cost of production was $1140/acre-foot. Itʼs anyoneʼs guess how he came up with that figure. If you calculate the marginal cost of water based on what the plant has actually produced since 2003, then the cost of water is closer to $1826/acre-foot. Either way, the reporter did the public a disservice by perpetuating the myth that desalinated water can be produced at $650 per acre-foot. I could almost hear the gullible politicians jumping on board.

The reporter could have provided a valuable public service had she written about Tampaʼs twelve years of bankruptcies, technical challenges, and cost overruns. A search of news archives produced an interesting collection of stories, likely with similar fact checking issues, but nevertheless, interesting for the overall picture they paint.

• 1998 engineering contract awarded to Stone & Webster
• 2000 Stone and Webster declares bankruptcy
• 2001 Covanta (partnering with Poseidon Resources) hired to construct and operate for 30 years at $7 million/year
• 2003 (March) initial output begins producing 3 million gallons but acceptance test fails
• 2003 (August) plant is shut due to clogged filters
• 2004 Tampa Bay pays $4.4 million for Covanta to go away
• 2004 (September) American Water Services hired to fix plant at cost of $29 million. Completion projected for 2006.
• 2006 (January) Agreement reached between Southwest Florida Water Management District (Swiftmud) (agency funding $85m of project) and Tampa Bay for payments: 25% when plant is running, 50% when it operates at an annual average rate of 12.5 mg/d for 12 consecutive months, 25% when plant produces 25 mg/d for four consecutive months.
• 2006 (November) Tampa Bay Executive Director announces additional delays
• 2007 (August) Tampa Bay announces plant should be running by Halloween
• 2007 (December) Officials complete 14 day acceptance test. American Water contracts to run plant for 15 years.
• 2008 $48 million over its original budget of $110 million, the plant is operating
• 2009 plant producing 16-19 mg/d
• 2010 (February) plant passes final benchmark, receives final payment
• 2010 (April) plant put on “standby” due to Tampa Bayʼs budget constraints
• 2010 (October) Pinellas County (customer of Tampa Bay Water) projects water rate increases of 16% by 2014
• 2010 (December) SWFMD looks into sanctions against Tampa Bay Water for failure to operate facility in accord with agreement.
• 2011 (January) Tampa Bay announces plans to reach 9 mg/d production by end of January.

Reviewing the news accounts of the Tampa Bay experience gave me pause. Having served in public office, I am familiar with the face-saving, “circle the wagons” mentality that takes over an agency when problems start to mount. Unfortunately, it means others are not likely to learn any lessons.

No one contemplated a standby plant at Tampa Bay. Now, faced with real production costs higher than the rate guaranteed to customers ($841/acre-foot versus $1140 or more), Tampa Bay will eventually have to raise rates or renegotiate an agreement that locks them a 17 mg/d production rate.

To be continued.

By John Earl
Surf City Voice

Sunday, Sept. 26, was a hot day in Surf City.

For me, however, most of the heat came from a chance encounter on a street corner with a local politician, not from the late blooming summer sun.

That politician, Joseph John Carchio, a.k.a. Jersey Joe, possible former owner of Jersey Joe’s Italian Eatery at 424 Olive Street, would insult my integrity as a person and a journalist multiple times; no problem there, that goes with the territory.

But I was shocked—and nerve racked for the rest of the day—when Carchio, an otherwise congenial member of the Huntington Beach City Council since 2006, and with whom I had enjoyed a professional but cordial acquaintance the past four years, lashed out. In a fit of intense anger, expressed with squinted eyes, a tightly stretched face and deliberately pronounced words, Jersey Joe, everybody’s friend, threatened me with dire warnings of “war” and “9-11.”

Was the threat just a bluff of hot air from a reelection candidate, who is desperately trying to hold on to his seat on the council, amid embarrassing revelations by the Surf City Voice that he could have to pay back thousands of dollars to the taxpayers for health benefits that he had kept his ex-wife signed up for even after their divorce,  a divorce which he had not revealed to the city or the public while maintaining on his two Facebook web sites that he is married and has eight children?

No doubt, with the emergence of Measure O—the city ballot infrastructure proposition that is partly aimed at the alleged excesses of the city’s public employees—in a time of great economic hardship and budget cutbacks for the city, the otherwise unemployed city councilperson has landed in the worst crisis of his political life. Continue Reading