Tag Archive | "Poseidon Resources"

A REBUTTAL TO POSEIDON RESOURCES’ ‘FACT vs. FICTION’ FLYER


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 republished it here. NoWaterDeal issued the counter rebuttal to Poseidon recently. 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.

By NoWaterDeal.com

Recently Poseidon Resources, through their media produced an open letter titled: “Don’t be misled by anti-desalination campaign mailer. Get the facts here.”

This letter makes a futile attempt to dispute the facts surrounding the Poseidon Huntington Beach Seawater Desalination Facility as presented in the No Water Deal With Poseidon mailer and website, which can be seen at www.nowaterdeal.com. Below we directly address the statements in their letter with the real facts regarding the project.

Statement: “Desalinated seawater will replace the need to import water; thus eliminating the imported water costs; however, in their calculation, opponents failed to deduct the avoided cost of imported water. This is an uninformed mistake.”

Fact: Jeff Kightlinger the Executive Director of The Metropolitan Water District (MET), the main water provider for Southern California has stated that the MET will not import less water from the delta or the Colorado River due to the existence of the Poseidon Huntington Beach Desalination Plant (personal communication on 3/18/2013). As another example, Poseidon signed a contract with MET in 2009 that included a section stating that the contract would be terminated if MET is required…to reduce defer, or exchange entitlement to or reduce usage of Colorado River water, State Water Project water, or other supplies…as a result of expected or actual Production of the Desalinated Seawater by the Project(Section 13, pg. 21 of the Draft CSDP Agreement 70025). It is quite clear that any water Poseidon produces will not replace imported water, and Poseidon knows that.

Statement: “If the cost of imported water continues to escalate as it has over the past twenty years, then over the life of the desalination project, Orange County water ratepayers will see a net savings, not a net increase in their water bill.”

Poseidon, god of the sea.

Poseidon, god of the sea.

Fact: Such claims have been made for at least 12 years and have not come to pass and probably never will. In presentations by Poseidon in 2003, they estimated that the cost of imported water would equal or exceed that of desalinated water in the 2013-14 timeframe. Here it is 2013 and that has not come to pass. On the contrary the proposed price per acre foot for desalinated water for the Huntington Beach project is about $1,700 compared to $400 for our abundant Orange County groundwater, $700 for imported water and $800 for local recycled water. So even over time desalinated water has remained far more expensive than all other supplies and is likely to remain so. Poseidon’s present prediction for the imported = desalinated water cost equation is for 2024-25 timeframe. It is interesting that this water cost equation is always predicted 10 to 12 years out. You be the judge of who’s being factual.

Statement: “Enforceable agreements between Poseidon and the City of Huntington Beach guarantees that Huntington Beach residents will pay less for water then they would without the desalination project.”

Fact: Huntington Beach signed an “Owner’s Participation Agreement” (“OPA”) with Poseidon Resources that includes the discounted purchase of some desalinated water. However, the discount will only apply to the first 3 Million-gallons-per-day (Mg/d) of 10 Mg/d total and to an emergency supply for 10 Mg/d for 7 days. (NOTE: What constitutes an “emergency” remains unstipulated.). So Huntington Beach will pay full price for 70% of the water received from the project

Statement: “A recent negative campaign mailer circulated by opponents erroneously claims the project will add $5 billion dollars to local water bills over the next 30 years.”

Fact: Unlike Poseidon’s often fuzzy math , the No Water Deal With Poseidon mailer states the precise arithmetic it used to come up with the “$5 billion” figure. All the numbers were derived from Poseidon’s own term sheet for the purchase of water produced by its HB project plant. You be the judge of who’s being factual.

By the way, the No Water Deal With Poseidon mailer is not “anti-desalination”. It does, however, provide the facts regarding irresponsible desalination projects like Poseidon Resources has proposed for Huntington Beach.

No Water Deal With Poseidon

www.nowaterdeal.com

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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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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

Posted in Environment, Headlines, Poseidon, Water, Water BoardingComments (6)

Water Board’s Penthouse-View Meeting: More transparency please, and save some food for the water buffaloes


By John Earl
Surf City Voice

A “special” meeting of the Board of Directors of the Municipal Water District of Orange County (MWDOC), originally designed by Best Best & Krieger of Irvine– the largest public agency law firm in California – to schmooze its new clients, became a public embarrassment Tuesday when the plush solitude of its penthouse-view executive board room was invaded by a small band of transparency advocates.

MWDOC meetings are normally held on the ground (and only) floor of its home office, humbly but conveniently located next to the County’s sewage treatment plant in Fountain Valley.

Despite the surprise BBK location, in addition to the usual inconvenience of morning meetings that are designed to accommodate MWDOC’s directors, most of whom are retired from professional life, but not the working public, 10 citizens at large—a rare turnout by MWDOC standards—attended, barely fitting into a small setting that clearly wasn’t intended for them.

But that setting was perfect for MWDOC’s seven water buffaloes: a towering view of Irvine’s skyline to be enjoyed with two large bowls of salad, what looked like two large dishes of lasagna, and plenty of chunky chocolate chip cookies, all nicely placed buffet style.

BBK’s recent additions, partner Russell G. Behrens and counsel Daniel J. Payne, both know what six of the seven MWDOC directors like (the seventh, Wayne Osborne, is a new comer) because they worked for them before as part of Kidman Behrens and Tague.

In January they left KBT for BBK and took MWDOC with them, entering into a five month test, according to MWDOC’s General Manager, Kevin Hunt. The purpose of Tuesday’s meeting was for BBK to seduce and corral MWDOC’s water buffaloes, thus sealing the deal.

So BBK’s managing partner, Eric Garner, used his very brief presentation to try to impress the board with the firm’s expertise in public agency law in general and water law in particular.

“When I’m not managing lawyers, I do still practice water law,” Garner cheerfully explained. “It would be a great privilege to work with the district if the opportunity ever arises for the need for my expertise. I can’t imagine ever practicing any water (sic) but water law to me. It is by far the most fascinating, interesting area in the legal world.”

Garner might get that opportunity to use his expertise sooner than he expected; but, judging from the sour look on his face, he wasn’t happy to hear former Huntington Beach mayor Debbie Cook infer that the opportunity would only arrive due to BBK’s incompetence. Read the full story

Posted in Environment, Headlines, MWDOC, Poseidon, Water, Water BoardingComments (2)

Comment: Water Agency Should be More Transparent on Huntington Beach Desal Plant


By Joe Geever
Surf Rider Foundation

Joe Geever is the Water Programs Manager for the Surf Rider Foundation, which works to protect ocean resources. He made these comments at the May 15 meeting of the Board of Directors of the Municipal Water District of Orange County. Originally, the directors had planned to go into closed session to discuss pricing arrangements for water to be delivered from an as yet unpermitted and unfinanced ocean desalination plant proposed by Poseidon Resources Inc. to be built in Huntington Beach, California. The meeting was criticized as a violation of California’s open meetings law, the Brown Act, and postponed until September.

My name is Joe Geever and I’m with the Surf Rider Foundation.

I don’t know if all the board members remember – the staff certainly does – that we actively supported your  desal pilot plant in Doheny. And we did that for two reasons. One, because we thought that research needed to be done to identify what the best intake for minimizing marine life mortality was. But also because of the assurances that staff gave us that this would be a completely open, transparent, public process in everything that went on with that project. And they have kept to that promise.

Now what I read is that this process [for the closed Poseidon meeting] is quite different. It feels as if you’re trying to find what the legal limits are for avoiding public transparency.

I guess I would urge you to lean in the other direction, to be as open and transparent and involve the public as much as possible from the beginning.

In my mind, it’s kind of ironic that you’re waiting to see how things play out with San Diego Count with the water purchase agreement from there because I think that’s the model for how not to do it.

The project proponent [Poseidon Resources] would like to blame all the delays on regulatory processes, when actually that project has been stalled because of information withheld or information that was submitted to regulatory agencies that was later discovered to be false. And all of this was happening behind closed doors. It hasn’t helped them move the project forward and it hasn’t engendered any kinfo of public confidence in the project at all.

You can get attorneys together and argue for minimal transparency and public participation and probably have a lot of legal battles over that. Or, you can lean the other way, toward as much transparency and public participation as possible, like you have in Dana Point, and see where the chips fall. So, I would urge you to lean that way.

 

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GM Nixes Secret Desal Talks with Poseidon After Brown Act Complaints


By John Earl
Surf City Voice

Confronted by complaints of illegality, the Municipal Water District of Orange County (MWDOC) dropped a scheduled closed session section of a meeting of its board of directors scheduled for today (May 15) at 11 a.m.

General Manager Kevin Hunt had scheduled the closed session in order to meet with officials of Poseidon Resources Inc., the company that proposes to build the as yet unfinanced and unpermitted $750 million ocean desalination plant that would convert about 100 million gallons of ocean water into 50 million gallons of drinking water every day.

The public meeting will go ahead minus the Poseidon item, but instead of holding session at MWDOC’s regular location in Fountain Valley, the seven board members will meet at the offices of the agency’s new legal team, Best, Best & Krieger (BKK).

Lunch will be served, according to the agenda.

The topic of discussion for the now deleted closed session item, according to the original agenda, was “price and terms of payment” for the water that Poseidon would produce.

California’s open meetings law, the Brown Act, requires that all legislative meetings be open to the public, with certain exceptions like negotiations for the sale or lease of real property. Water rights are treated as real property and Hunt, under advice from BKK, assumes that Poseidon holds water rights for the drinking water it will presumably produce, according to Hunt, a view that is disputed. Read the full story

Posted in Environment, Headlines, MWDOC, Poseidon, Water, Water BoardingComments (4)

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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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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