Tag Archive | "desalination"

Rebuttal to Poseidon Critics from Poseidon Resources, Inc: Huntington Beach Desalination Project


Editor’s Note: Opponents of an ocean desalination plant (Nowaterdeal) proposed for Huntington Beach, California, recently launched a major campaign to block the project (here). Poseidon Resources created a response to some of those claims and is circulating it publicly. The Voice republishes it below. NoWaterDeal’s counter rebuttal can be read here. On Monday, May 6, the Huntington Beach City Council will consider a proposal (here) by Mayor Connie Boardman to recommended to the California Coastal Coastal Commission to deny the Coastal Development Permit for the project when it considers the project this summer.

Huntington Beach Desalination Project

Fact vs. Fiction

Opponents of seawater desalination are distributing a campaign mailer with misleading and factually incorrect claims about the Huntington Beach Desalination Project and the cost of desalinated water. This fact sheet corrects these erroneous claims.

Claim: “$5 billion dollars will be added to local water bills … These bills could total $8,500 for the average retail water customers over the next 30 years.”

Fact: This claim is factually incorrect. The cost of water from the desalination project is not additive, as the claim assumes. Drinking water produced by the desalination project will replace an equivalent amount of imported water into Orange County and thus eliminate the related imported water costs to the consumer. The claim above fails to take this fact into account. If the avoided imported water costs were taken into account, the $5 billion claim would be reduced by billions, potentially even more than $5 billion, in which case buying the desalinated water would result in savings to the ratepayers of Orange County. If the historical rate of imported water escalation is assumed for the next 30 years, purchasing the desalinated water would indeed result in significant savings1. Additionally, the $5 billion cost claim factors in an arbitrary escalation of desalination water at 3.5% annually and fails to account for available local water supply development financial incentives that will reduce the cost of desalinated water by up to $250 per acre foot or $14 million a year2.

1 6.4% = MWD’s Full Service, Treated Tier 1 Rate’s historical average annual rate of increase during 37 year period from 1978

– 2014.

2 $14 million = $250 per acre foot financial incentive x 56,000 acre feet per year produced by the desalination plant.

3 City of Huntington Beach Entitlement and Plan Amendment 10-001, approved September 2010

4 20 year period from 1993-2012 for CPI-U series identification numbers CUURA421SA0 & CUUSA421SA0 (All Items, Los Angeles-Riverside-Orange County, CA)

5 Average Retail Electric Utility Prices, Industrial, as published by the CA Energy Commission

This claim is also factually incorrect as it pertains to ratepayers living in the City of Huntington Beach. As a condition to the permits3 issued by the City of Huntington Beach to Poseidon’s desalination project, the City, at its option, can receive up to 3,360 acre feet per year of desalinated water at the lower of a 5% discounted price off the rate the City pays the Municipal Water District of Orange County for imported water and the cost of the desalinated water. This means that when the desalination project comes online Huntington Beach residents will be paying less for imported water than they would without the project. This requirement will save the City’s ratepayers tens of millions of dollars over the 30 year term of the project.

Ultimately, the cost impact of integrating desalinated water will differ from city to city based on each city’s water supply mix and rate structure as well as the future escalation of imported water rates. However, the Huntington Beach Desalination Project will provide Orange County with a substantial supply of locally-controlled, drought-proof water. These are attractive characteristics that imported water simply cannot offer, given the current and future water demands, environmental concerns, pumping restrictions and threats on the State Water Project and Colorado River Basin.

Claim: The mailer applies an arbitrary inflation figure of 3.5% per year to the cost of desalinated water.

Fact: Poseidon expects the cost of desalinated water to escalate at 2.5% per year. Approximately half of the cost of desalinated water will cover capital costs and escalate at a fixed 2.5% per year. The remaining balance of the cost covers the operating and electricity costs of the Project. The portion of the desalinated water price that covers operating costs will escalate with the Consumer Price Index (CPI-U) for Orange County, which has averaged 2.4% per year over the last 20 years4. The portion that covers electricity costs will escalate with the applicable SoCal Edison industrial tariff rate, which has averaged 2.2% for the 20 year span from 1991-20105.

Claim: “No public subsidies for private profit”

Fact: Poseidon did not request and is not receiving “public subsidies” as part of the successful financing of its Carlsbad Desalination Project, and the company is not seeking public subsidies for its Huntington Beach Desalination Project. Public water agencies in Orange County that buy desalinated water are eligible for an up-to-$250 per acre foot financial incentive from MWD under its Seawater Desalination Program (SDP). This same financial incentive under MWD’s Local Resource Program (LRP) has been used to financially support the OCWD’s Groundwater Replenishment System (GWR). The LRP is designed to foster the development of local water supplies that initially cost more than imported water supplies, and as such they reduce, not increase, water costs for Orange County consumers. Poseidon is neither a public agency nor an MWD member and is not eligible for the funds. MWD funding is subject to strict accounting and auditing measures, and the incentive funds are only available to the purchasers of water to offset predetermined costs.

Claim: “It’s just too risky … In Australia four of six desalination plants built since 2006 sit idle in stand-by mode.”

Scott Malonie

Scott Malonie, Poseidon Resources Inc., Vice President: Photo SCV

Fact: This reference to Australian and its desalination plants is misleading and not analogous to the Huntington Beach project. The regions in Australia where these plants are built experience up to four times the annual precipitation as Southern California and therefore do not need to import water like Orange County. As such, not all the Australian plants were built to operate on a base load capacity. Desalinated water is intended to meet a small portion of Orange County’s supply needs as part of its overall strategy to improve reliability through diversification of water sources. The Huntington Beach project’s maximum 56,000 acre feet per year capacity will be approximately 8% of Orange County’s total demand, so it’s only one component of supply designed to offset the need to import an equivalent amount of water that is subject to regulatory and environmental restrictions, making it less reliable. The Huntington Beach plant and its water reliability agreements will be structured such that the public agency customers will always need and use what the facility produces.

Furthermore, Poseidon alone bears the risk of permitting, development, financing, constructing and operating the Huntington Beach Desalination Project. The innovative public-private partnership structure that Poseidon proposes shields Orange County ratepayers from the risk of a failed financing, over-budget construction, or failure to produce water at the amounts specified in the agreements during operations. In fact, the public agencies purchasing the water would not pay for any water until the Project has been constructed and water has been received by the agencies meeting contractual specifications for quantity, quality, reliability and price.

Claim: Poseidon’s beach-front water factory will suck sea life into their intake pipes with the water, kill and puree millions of organisms, then pump out a briny stew and create a dead zone off Huntington Beach.”

Fact: The Huntington Beach Desalination Project will be located east of Pacific Coast Highway, over a quarter mile from the Pacific Ocean on industrial land behind the AES power plant. The desalination project has a certified Subsequent Environmental Impact Report and approved Coastal Development Permit from the City of Huntington Beach, an approved lease with the California State Lands Commission for use of the seawater intake and discharge facilities and a discharge permit from the Santa Ana Regional Water Quality Control Board. In issuing these permits and approvals each local and state regulatory agency determined that the project can be built and operated with no significant impacts to marine life or water quality.

In issuing its approval the Santa Ana Regional Board found that for the desalination project will impinge approximately 0.78 lbs per day of fish, a fraction (less than 25%) of the daily diet of one brown pelican”6 and the discharge from the desalination plant will meet all federal and state receiving water quality standards.

6 Santa Ana Regional Water Quality Control Board Order No. RB-2012-0007, NPDES No. CA8000403; page F-33

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Posted in Headlines, PoseidonComments (2)

‘Nowaterdeal’: Desal Plant Opponents Will Reach Out to Thousands of Orange County Voters


By John Earl
Surf City Voice

A growing number of county ratepayers, inspired by the late Gus Ayer, and opposed to a plan by Poseidon Resources Inc. to build an ocean desalination plant in Huntington Beach, have a message for the Municipal Water District of Orange County (MWDOC) and its 28 member agencies:

No more secret negotiations or deals with Poseidon and don’t make us pay an additional $5 billion in local water bills—$8,500 per ratepayer—over the next 30 years for water that we don’t need.

Thirty-years is the time period in which the water agencies that contract with Poseidon would be required to pay for Poseidon’s desalinated water, whether it is needed or not, according to the water purchase agreement (WPA) made public by MWDOC in January.

The buyers “will agree to take (on a ‘take if delivered’ basis) [56,000] acre-feet per year of Product Water (the ‘Committed Amount’),” the WPA states. And if the buyers don’t take that amount of water, they will, “nonetheless pay Seller a per-acre foot charge to be set forth in the Contract…”

The WPA is not final, but it is the culmination of a decade-long relationship between MWDOC, its water agencies, and Poseidon.

The opposition group, heralding online as www.nowaterdeal.com, plans to spend tens-of- thousands of dollars to inform other ratepayers in high propensity voting areas of the county about Poseidon’s proposed “take or pay” contract, asking them to urge their local elected officials not to sign it.

Nowaterdeal is a coalition of members of Residents for Responsible Desal and other local ratepayers, including members of the Surfrider Foundation, League of Conservation Voters, and Orange County Coastkeepers, who at least until now had been fighting an uphill battle against Poseidon’s well financed lobbying efforts and a marketing campaign (largely unquestioned in the county’s major daily newspaper) that depicts its desalination plant as a future fallback point in case of prolonged drought or a natural disaster that would disrupt the flow of water to the public.

Poseidon would risk private investor flight without the guaranteed income, but take or pay would be risky for ratepayers if, as happened in drought drenched Australia, if the desalination plant were to sit idle due to lack of need. Currently, the Metropolitan Water District of Southern California (MWD), which sells water to MWDOC, has more surplus water stored up now (enough for 2.5 years) than ever before—testament to the ability to create backup reliability water without Poseidon.

Ocean desalination’s high maintenance and construction costs—and much higher energy costs—make it too risky, nowaterdeal says. Stuck with higher water rates and an idle desalination plant, ratepayers would fall into a rate trap. “As rates go up, people use less water” and “lower demand results in even higher rates, with fixed costs of the entire system spread over fewer units of water.”

Pimping2

Gus Ayer: MWDOC is pimping for Poseidon and should be eliminated. Photo: John Earl

The high cost-prediction is from information provided by Poseidon in the WPA and factors in conveyance and maintenance costs. With an inflation rate of 3.5 percent factored in, that means an estimated cost of $1,795 per acre foot for the desalinated water, compared to $285 per acre foot for local groundwater and $835 per acre foot for imported water, nowaterdeal says.

Acknowledging the higher cost of desalination, Poseidon VP Scott Maloni recently told the OC Register that Orange County residents have to ask, “What is the value of that reliability to them?”

But the underlying push for desalination plants along the California coast by the desalination industry and other development related business interests is not about drought relief alone, as MWDOC/MWD director Brett Barbre pointed out at a recent MWDOC committee meeting.

Barbre supports the Poseidon project and a smaller, less controversial, desalination project envisioned (but far from certain) for Dana Point in south Orange County. He also thinks that ratepayers throughout the county should have to pay for both projects on the basis that they would benefit everyone, even in water districts that say they don’t want or need the water.

“I believe that desal is not only for reliability. It’s also for growth,” he said. “And there are folks on the environmental side who don’t want any growth and they think if you don’t build water projects you can conserve your way to provide enough water for everybody. And that’s not ever going to happen.”

Although most of Poseidon’s opponents have always been concerned about the environmental effects of ocean desalination, the main focus of their current campaign is economic, while advocating for the development of proven and much cheaper water sources, including the Orange County Water District’s (OCWD) groundwater replenishment system, capturing rainwater, and conservation.

To start, the group will focus on about 50,000 voters in 14 north county cities, including Anaheim, Brea, Buena Park, La Palma, Orange, Newport Beach, Santa Ana, Seal Beach, Tustin and Westminster.

Twenty Orange County water agencies had signed non-binding letters of intent or memorandums of understanding with Poseidon to purchase, cumulatively, over 80,000 acre feet of water each year. Since those non-binding agreements expired in June, 2011, not a single agency has yet to renew.

Correction 02/05/2013: Eighteen agencies have signed Letters of Intent that have no expiration date, according to Karl Seckel, MWDOC’s acting General Manager. Those agencies, with the exception of Fullerton, are slated to participate in “working group discussions” regarding Poseidon during the 2012 fiscal year. Four other agencies are participating in working group discussions but have not signed LOIs. Participation in working group discussions is contingent upon signing a confidentiality agreement with Poseidon, but not all agencies that signed an LOI signed that agreement. The MOUs, which one presumes carried more weight, have all expired.

As Poseidon works to form an agreement with MWDOC and its member agencies, it requires all parties involved in project discussions to pledge absolute secrecy at Poseidon’s whim.

That lack of transparency and the overall elitist/exclusionary attitude at MWDOC and other OC water agencies, including their secret and arguably illegal meetings with Poseidon–all observed by a growing number of citizen spectators at water board meetings, as well as the company’s financial support of an ethically challenged hit piece in the recent Huntington Beach City Council campaign, have inspired Poseidon’s opponents, not only to challenge its political hegemony with a renewed vigor but to question the nature of Orange County water management as whole.

A temporary setback occurred for nowaterdeal when its chief strategist, former Fountain Valley mayor Gus Ayer, a master at crafting successful political campaigns in Orange County, died last week.

Earlier in the month, at a recent joint meeting of MWDOC and OCWD, Ayer praised the latter for its groundwater replenishment program and overall good management, but accused MWDOC of “mission creep” and “pimping for Poseidon.”

He also questioned whether MWDOC should exist.

“It’s time for OCWD to take a very close look at taking over these [MWDOC’s redundant] functions and eliminating MWDOC,” he said. Ayer expanded on that theme in a column written just before his death and published in the Surf City Voice.

Ayer’s untimely death saddened his colleagues but his upbeat attitude continues to motivate them.

“Gus’s last words to me were ‘Give them hell’”, recalled former Huntington Beach mayor Debbie Cook, who, during the past two years, has actively campaigned for greater transparency in water management.

“That was his way of saying that, if we don’t participate in democracy, we deserve the inevitable results. Nobody can replace our friend’s skill set, but he sparked a fire that emboldens us to carry on.”

 

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Election Changes: Poseidon Desalination Plan Isn’t Popular With New Huntington Beach City Council


By John Earl
Surf City Voice

Poseidon, the God of the Sea, might have suffered a tsunami headache after seeing the results of the Nov. 6 election for the Huntington Beach City Council.

That’s because in December, when three newly elected city council members are sworn into office, the current 5 – 2 majority of the faithful will become a solid 5-2 majority of non-believers in Poseidon Resources Inc.’s nearly $1 billion ocean desalination plant proposed for the southeast corner of Huntington Beach.

Since 2004, the council has approved city permits and certifications for the desalination project regardless of incomplete environmental impact reports, threats to a fragile marine eco-system, the need to dig up local streets for a 10-mile-long pipeline, and skyrocketing cost increases ($150 million to nearly $1 billion).

All that in order to give water to Orange County residents that will cost them about three times as much as water from other sources and for a project that eschews sustainable water and energy management, including conservation, in favor of unlimited exploitation of natural resources for maximum corporate profit, regardless of the long-term consequences of urban sprawl and global warming.

Two of the newly elected Poseidon opponents, Jill Hardy and Dave Sullivan, return to the council after two previous terms ending in 2010 in which they voted repeatedly against the project. The third, newcomer James Katapodis, supported Poseidon in his previous unsuccessful election attempt but changed his position after meetings with local Poseidon opponents.

They will join incumbents Connie Boardman and Joe Shaw to form a new anti-Poseidon city council majority.

In desperation, Poseidon helped fund three sleazy anti-Hardy mailers that portrayed her as “anti-children” and all but a child molester for opposing a lift on the city’s ban on fireworks.

But that plan seemed to backfire.

Polling conducted a few weeks prior to the mailers showed Hardy coming in second behind Dave Sullivan, with pro Poseidon candidate Barbara Degleize next. But Hardy finished with over 2,000 votes more than Katapodis and Sullivan who finished second and third respectively.

Whether the new anti-Poseidon city council will be able to stop Poseidon’s ocean desalination dream from becoming reality seems doubtful but not impossible.

First, the Municipal Water District of Orange County is pondering the purchase of Poseidon’s water for resale to its 28 member agencies in Orange County (as opposed to the current strategy of separate agreements between the company and each agency). That would give the city a vote on whether MWDOC should enter into an agreement with Poseidon or not, in which case the new council would be inclined to vote no.

Second, Poseidon’s Coastal Development permit is under appeal before the Coastal Commission. The issue is whether the city violated its own Local Coastal Plan. Depending on how the Coastal Commission rules, the permit could be sent back to the city council for another vote.

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Interview with Mesa Water’s Paul Shoenberger on CalDesal


By John Earl
Surf City Voice

In January, I sat down for 30 minutes with Paul Shoenberger, the general manager for the Mesa Consolidated Water District in Costa Mesa, California, to talk about CalDesal a non-profit organization whose 70 or so members, according to April, 2011 stats (neither Mesa nor CalDesal will release up to date figures), are about evenly divided between public water agencies and private water-related companies.

CalDesal lobbies for the construction of ocean and groundwater water desalination (although the emphasis is mostly on ocean desalination) and for the “streamlining” of environmental regulations to help achieve that goal.

Mesa Water Directors James Atkinson and James Fisler mix up business with pleasure at CalDesal mixer. Photo: Public records

Shortly into the 21st Century, plans to build ocean desalination plants where proposed for the cities of Carlsbad and Huntington Beach. Most of the permitting process has been completed for both plants but huge financial obstacles remain after construction costs and estimated water rates have skyrocketed.

Poseidon Resources Inc. would build the two nearly identical ocean desalination plants, each of which will suck in over 100 million gallons of sea water each per day to produce 50 million gallons of potable drinking water. They would be the largest ocean desalination plants in the United States at an estimated cost of over $700 million each.

In 2006, twenty-nine ocean desalination plants of various sizes were envisioned for the California coastline all the way to Santa Cruz, including a 15 million gallon per day facility that just finished its testing phase in Dana Point.

But after more than a decade of planning and marketing, and pushing projects through the planning and permitting process, a tight coalition of water industry leaders, real estate developers, and public-sector technocrats is far from realizing its desalination dream.

Only nine ocean desalination proposals remain in contention and not a single one has broken ground or seems likely to anytime soon.

That’s good news for opposition groups who have long claimed that ocean desalination is too costly and damaging to the ocean environment, and that conservation, sewage water reclamation, and increased water capture and storage are the right methods for ensuring an adequate water supply for California in the future.

Shoenberger and other proponents, however, officially insist that ocean desalination is not a “silver bullet” but will be a vital part of California’s water portfolio. They depict the process as environmentally sound and sustainable and say that costs for desalinated ocean water will one day be less than the costs of imported water from the San Joaquin Delta and the Colorado River.

In any case, they say, developing ocean desalination infrastructure is worth the extra cost due to potentially disastrous water supply outcomes for California from earthquakes and drought, and that it will help create badly needed jobs.

But public opposition to building ocean desalination plants along the coast has grown stronger over the past decade along with other potential obstacles to plans to construct ocean desalination plants in California.

CalDesal mixer and board meeting

Paul Shoenberger (r) with CalDesal member at 2011 spring board meeting/mixer. Photo: Public records

Once-through-cooling, the intake method preferred by desalination proponents because it sucks in huge quantities of sea water through already existing intake systems attached to electrical power generating plants – like exist in Carlsbad and Huntington Beach – is deemed destructive to the coast’s fragile balance of marine life by ocean scientists, and state regulators have ordered it to be phased out within a decade.

How that ban will apply to ocean desalination, if at all, is under consideration by state regulators. Opponents and proponents are vying for influence in that debate.

In the midst of a weak economy, and as the research and development needed to provide the promised cost-saving technological improvements has reached a dead end, even some long-time ocean desalination proponents are now questioning the efficacy of large desalination projects. Read the full story

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Water Boarding: MET Chairman John V. Foley’s $15,000 ‘Oversight’ Disclosed


John Earl
Surf City Voice

Lately, southern California’s top water official, John V. Foley, has been explaining his apparent violations of a state law that requires public officials to disclose their economic interests.

Foley is chairman of the Metropolitan Water District of Southern California (MWD).

The Surf City Voice recently reported that Foley, who was appointed to the MWD by the Municipal Water District of Orange County (MWDOC), failed to report an estimated $248,000 of income that his wife, Mary Jane Foley, earned as a consultant for various water agencies in Los Angeles, Orange and San Diego counties, going back to 2004. That disclosure came from public records obtained by the Voice.

Now, more public records obtained since then reveal that Foley also failed to report over $15,000 of his own income as a private consultant for the Moulton Niguel Water District (Moulton) in south Orange County going back to late 2008.

His failure to report that income was “an oversight,” Foley told the Voice.

The newly obtained documents include the invoices that Foley filed at Moulton when he worked as a private consultant for that agency under a contract (also obtained by the Voice) that is still open.  But he did not report that income on the original financial disclosure (700) forms he filed with the MWD nor in amended versions that followed, records show. Read the full story

Posted in Headlines, MWD, MWDOC, Poseidon, Water, Water BoardingComments (1)

Water Boarding: Revered Water Director Didn’t Disclose Wife’s Income


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.

California’s Political Reform 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?”

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Dead in the Water? Requested Subsidy for Surf City Desal Project Stirs Debate


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.

Scott Maloni of Poseidon Resources Inc.

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?

 

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Commentary: Why Desalination is Dead in California


By Conner Everts
Desal Response Group

Drinking water from the Sea?

Sounds like a great idea. JFK once said that it would be a greater achievement than putting a man on the moon, and most polls have shown a 70 percent acceptance rate of the idea.

So what is the problem?

The corollary to JFK’s statement would be “when economically and environmentally feasible” and therein is the challenge.  However, the first question that should be asked is do we need ocean water desalination (often called desal) in California and would it hurt or harm the environment compared to its alternatives?

In 2006 there were 29 proposals for ocean desal projects along the California coast, with many attached to old coastal power plants, now there are only nine.  While industry proponents blame California’s protective environmental regulations and a few environmentalists’ opposition, there were three main issues that stalled the proposals.

First, despite the State Desal Task Force convened by legislation, there is no consensus on a regulatory order or state-wide direction. So each proposal lumbered through the multi-agency process.

That’s as it should be because if there is a large scale desal plant built in California it will be the first on the Pacific coast and largest in the Western Hemisphere.  The first proponent out of the gate was Poseidon, a private corporation from Connecticut that failed with its first desal project – the largest in the nation at 25 million gallons a day – in  Tampa Bay, Florida, and then proposed two more plants, each with twice that capacity, one in Huntington Beach in Orange County and the other in Carlsbad in north San Diego county.

While working hard to gather political support for its southern California desal projects, Poseidon failed to respond to repeated information requests by the Coastal Commission or to follow its permitting guidelines. Meanwhile, local opposition grew and water agencies weighed into issues of the marine environment, which they little understood, and were forced to navigate California’s complex and arcane water supply laws as well.

Second, conceived in a time of drought, the most recent crop of desal proposals depended on a fear of limited water supply while demand was high for new development. This was especially true where desal plants were proposed on the coast, thus allowing entry points for previously undeveloped areas with limited water supply.

With the collapse of the global economy, developments now sit idle and the need for desal as a redundant water supply for more growth is being questioned.  Promoted as an offset to water pumped over the Tehachapis and therefore reducing greenhouse gas emissions, the opposite is true. The Metropolitan Water District of Southern California (MWD) states in its subsidy contract that the water produced by desal would not curtail deliveries of any imported water source.  Rather blood would be let on the floors of the MWD boardroom before anyone at MWD would give up any sacrosanct water rights.

Furthermore, the promises that these proposed desal plants would offset water taken from the SF Bay Delta turned out to be false. Given the long history of getting water back to fish and the environment, there is no regulatory process to make that happen. Just look at the 20 years of litigation that has taken place over Mono Lake.

Third: first things first. There are untapped and cost-effective local water resources that must be developed and that have environmental benefits, unlike desal, such as maximizing serious water conservation and water reclamation, capturing and treating urban and storm-water runoff, expanding now legal greywater and rainwater cistern systems, and fixing leaky infrastructure or pipes.

Combine that with a systems approach with watershed management and we begin to get to the point that Australia, Spain, and Israel did before they invested in desal – which meant reducing per capita water demand to 30-50 gallons per day. Compare that to 174 gallons for California as a whole and 121 gallons for Los Angeles.

Many areas across the state, including Los Angeles and Long Beach, have had serious reductions in water demand and eliminated the need for desal—it’s not in Los Angeles’ 20 year supply plan and Long Beach is reconsidering after careful research.

California spent $50 million of Prop. 50 water bond monies on researching this issue and while not all the grant results have been revealed the emerging consensus is that proponents’ promise of a technological breakthrough that makes desal feasible or necessary hasn’t been realized. This is a case of its not the technology, stupid, it is the lack economic considerations and available capital.

And then it rain, and rained, and continues to rain.  Reservoirs filled and spilled.  Snow pack reached record levels in the Rockies, from where a portion of our imported supply originates.  If we had only realized the potential to capture rainwater and redistribute stormwater back into our depleted underground aquifers, this would have been a great winter to replenish the bank of locally stored water.

A quick historical perspective shows that ocean water desal plans come and go in California.  In the 60s and 70s it was twin nuclear power plant islands to be built offshore and provide all the water we needed and a small plant that was sent from the navel base in Point Loma to Guantanamo in Cuba.

In the 80s and 90s it was the Santa Barbara plant that was built in the middle of the six-year drought and was idled before it ever was connected by El  Niño spring. While it is still being paid for it is more cost effective not to run it.

At Catalina Island in the late 80s a small plant was built as a back up to allow a developer to build condos.  It sat idle for many years until Southern California Edison took it over, and in the only place where they sell water it takes 70 percent of the island’s electricity to produce 20 percent of its water.

Internationally, where there is often no other choice, limits have been reached but with a price. Australia is now deeply indebted for billions for plants that sit idle and have been flooded.  Even the Middle East is having problems with desal with huge demands for energy and subsidized water in Saudi Arabia and discharge levels that increase salinity and therefore energy demands in enclosed areas.

Ocean desal is promoted heavily by a cabal of membrane manufacturers, including GE, power plants operators hoping to keep their old fish-killing machines operating, water agencies looking for large capital projects built with some else’s money, engineering consultants and even Las Vegas.

But the bloom is off the issue. It looks good on the outside but once you delve into the inside there are problems, like fast food might sound good at the moment of hunger but the results of eating it are negative.  Investing in the current crop of desal plants is like buying an old Hummer with today’s gas prices.

Concerned citizens who organized statewide and locally to inform the public and fight the desalination surge can now declare victory and focus back on appropriate multi-benefit local water resources.  It does not mean we won’t continue to monitor these projects but to focus on only the fight would validate an issue that, once again, has passed away. After ten years, this time, we should celebrate a successful fight that brought this to the light of day and the fact that California is not ready for ocean desal and it is not ready for us.

There are many other issues around desal including energy intensity, huge marine and fishery impacts and the alternatives, drinking water quality, sea-level rise with industrializing the coast and the true costs of water. Go to the website www.desalresponsegroup.org for more than you would want to know and links to the many references made in this article.

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Water Privatization & Desalination: Lessons from Australia


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.

Lou Correa and Scott Maloni

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 21st 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.

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Carlsbad Desal Buyout Likely – Min Taxpayer Cost: $640 Million


By David Rosenfeld
DC Bureau
Wednesday, 06 April 2011

When it comes to the future of desalinated water in California, San Diego County is facing a reality check. In agreements signed years ago, nine local water agencies brokered sweetheart deals with Poseidon Resources, an investor-owned Connecticut company that has been planning to build and operate a desalination plant in Carlsbad for the past 12 years.

The agreements guaranteed those nine agencies would not pay the true cost of desalinated ocean water – the most costly form of tap water on the planet – until the costs of imported water was even greater. And at that time, they would split the difference for up to 30 years once the plant was up and running.

But those contracts, as they appeared, were too good to be true. They were so good, in fact, for the water agencies that it made the project financially unfeasible, resulting in a near junk bond rating last year as Poseidon prepared to float $530 million in tax-exempt private activity bonds.

So the bond sales were put on hold and the contracts were renegotiated with Poseidon asking the San Diego County Water Authority for an additional subsidy and possibly to buy the nearly $700 million plant if there are future problems. (Poseidon had trouble with their desalination plant in Tampa Bay, Floridaand the Tampa Bay Water Authority had to take over that project.)

Rather than pass-through millions of dollars in subsidies, including up to $350 million from the regional wholesaler Metropolitan Water District of Southern California, the Water Authority is brokering its own deal with Poseidon to purchase the water directly.

“Those (local) agencies wanted to purchase the desalinated water at a price that was never more than buying water from the Water Authority, and that’s not possible. That was not financially viable,” said Ken Weinberg, director of water resources for the San Diego County Water Authority. “Discussions we’re having now is about paying the actual cost of production and distribution of that water.” 

The maximum price would be set at $1,600 per acre-foot in today’s dollars compared to around $800 for imported water currently. Exactly how much desalinated water the Water Authority will agree to buy from Poseidon – to then resell to local agencies – is still being negotiated in closed-door meetings. Poseidon spokesman Scott Maloni did not return repeated requests for comment.

Based on the average price of desalinated water around the globe at around $3,000 to $4,000, Poseidon may be still underestimating.

The new deal will certainly be more favorable to Poseidon’s equity investors – which change frequently and have included Warburg Pincus, Citi Sustainable and GE Capital.

The deal will undoubtedly be worse, however, for Southern California ratepayers, who increasingly find themselves at a disadvantage when it comes to what they will pay for life’s most essential resource.

“The Water Authority will have to raise its rates to cover additional costs of desalination,” said Glenn Pruim, utilities director for Carlsbad Regional Water District.  “It’s definitely in the best interest of the investors. This is a really good deal for Poseidon. It’s a good deal for the Water Authority because they are securing a regional source of water and it could be a good deal for Carlsbad. We just hope they are as good at negotiating deals as they are at making water.” 

Eight of the nine local water agencies that had deals with Poseidon – all but Carlsbad – have agreed to rip up their contracts and let the Water Authority proceed. Carlsbad is holding out for an agreement that guarantees a portion of the tax revenues the city would lose if the Water Authority ever exercised its right to buy the plant. Pruim said the two parties will likely reach an accord soon.

“Poseidon’s business plan doesn’t really make sense except that they get bought out by a public agency,” said Conner Everts, director of Desal Response Group, which would prefer more conservation measures before beginning desalination efforts. “We don’t really think they are there to honestly be a company producing water. We think they are there to buy permits and then get bought out.”

The Water Authority along with Poseidon and its investors are betting that the price of imported water will soon exceed the astronomical price of desalinated water. Various experts interviewed for this series believe it could be anywhere from 10 to 20 years. Yet Poseidon reportedly believes it could take less than five years.

“I don’t know how practical that is,” Pruim said. “Part of it is just reality. Poseidon isn’t manipulating the price of water. It is what it is. They are taking advantage of that in a way. The only thing that could go wrong is if Poseidon can’t produce it and they go bankrupt.”

An analysis by the Public Education Center’s DCBureau.org published last year showed that while private equity and bonds would be used for upfront construction, southern Californians would pay at least $640 million over 30 years for the project, including as much as $374 million in public subsidies. Those subsidies are largely still in place as Poseidon looks to forge a new agreement and finally break ground later this year to start producing water by 2015.

In Poseidon’s latest legal victory, California’s 4th District Court of Appeal rejected a claim by San Diego Coastkeeper to conduct additional environmental studies. 

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



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