Shawn Dewane of Costa Mesa is the free-marketeer point man for Poseidon Resources, the water dealer that wants to combine public and private funds to build a $1 billion ocean desalination plant in Huntington Beach.
The project would be built under the auspices of the Orange County Water District(OCWD), which manages the county’s groundwater basin and provides 2.4 million north-county residents with 75 percent of their water.
The table takes up almost half of the room, which is less than the size of the garage space provided at your local self-service car wash.
Bilodeau sat with five fellow members of the OCWD Board of Directors (Sarmiento, Green, Anthony, Flory and Dewane), their legal counsel, a staff member, and the general manager who always sits at the head of the table under a wall TV.
The wall facing the general manager from the other end of the table and the wall to his right were lined with chairs occupied by other staff and a couple of public citizens.
Bilodeau sat on the side of the room to the general manager’s left. And there I was, standing a few feet behind him, with my iPhone perched on a monopod far above the back of his neck.
Directly behind me was a counter-top with the usual breakfast buffet of hard-boiled eggs, Danish, muffins, bagels, and fruit for the directors—bought with ratepayers’ money for about $95.00
“A journalist is a good citizen of his or her community.”
That’s what I learned from the editor of the Eugene Register Guard, while taking a college journalism class at the University of Oregon, more years ago than I would care to remember.
But what he said is still true today. And that’s why I am asking you, in this editorial, to please show up and speak out at the Orange County Water District board meeting, Wednesday, June 4, about a proposal on the agenda to spend $50,000 or more on a study that will financially benefit Poseidon Resources Inc., a shady corporation that wants to build a $1 billion ocean desalination plant in Huntington Beach and make us pay for it, whether we need the water it would produce or not.
Here’s why I think it’s important:
As explained in the recent Surf City Voice story, at the May 21 board meeting of the OCWD, Director Stephen Sheldon voted on a contract proposal that will benefit Poseidon, even though documentation he has filed with the District and the County shows that he works for a consulting company that has Poseidon for a client.
On March 14, 2013, Mesa Water District’s board of directors passed 5 – 0 a press credentialing policy. That policy is designed to tightly control media access to public functions, like the recent VIP private $50,000 party that the agency threw for itself at ratepayers’ expense. In my public speech to the board on that evening, I speculated as to the reasons for Mesa Water’s new obsession with creating a draconian press control policy. To supplement my views expressed that night, I offer the following 13 additional, specific, possible reasons for that obsession.
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
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.”
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
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.
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.”
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.”
(Editor’s note: This story has been republished below to correct a typo that could not be removed from the http link)
Over the past several months I have been trying to get to the truth behind Mesa Water District’s obsession with Poseidon Inc.’s proposal to build an ocean desalination plant in Huntington Beach.
Since 2009, the water agency has gone from a typical local water provider to become the State’s biggest booster of ocean desalination, spending tens of thousands of dollars in cash, resources, and staff time for a project that makes zero business sense.
So I spent the last week perusing Mesa’s board agendas. I now have a better understanding of the cause of the agency’s new found love affair.
First and foremost, you need look no further than Mesa’s general manager, Paul Shoenberger.
Prior to his employment at Mesa, Shoenberger worked for Los Angeles County’s biggest desalination cheerleader, West Basin Water District. In 2009, he concurrently served on Mesa’s board of directors before applying and “winning” his influential position as Mesa’s general manager.
But Shoenberger has some explaining to do about that victory.
The position was advertised in March of 2009 with a filing deadline of May 8, 2009. But Shoenberger didn’t resign his seat until July 13, 2009.
He may have thought he was escaping the perils of Government Code Section 1090 by leaving Mesa’s board meetings prior to any closed session discussions about the position, but 1090 precludes the entire board from negotiating a contract in which one of its members has a financial interest. Fortunately for Shoenberger, he needn’t worry too much—conflicts of interest are rarely prosecuted in Orange County.
Under the agenda item vaguely listed as “other,” and without a vote, the Mesa board gave Shoenberger the go ahead to start a secretive organization that would lobby on behalf of the desalination industry and developers. The board turned a blind eye and Shoenberger spent staff time and money as he saw fit to create CalDesal. Mesa board member Shawn Dewane became its first President.
CalDesal began with lofty goals, but its membership has remained static at about 70 in number — each paying $5,000 in annual dues — for two of its three years. That membership is divided about evenly between officials from public agencies, such as Mesa Water, and a mixture of corporate CEOs and consultants looking to make a killing in the client-rich environment that CalDesal was designed to provide for them.
CalDesal’s modus operandi is to lobby for desalination projects and regulatory “streamlining” — code word for rolling back fundamental environmental protection and permitting rules that stand in the way of desalination and unbridled development in general.
As CalDesal President and Mesa director, Dewane is reimbursed for travel expenses to the Sacramento based “non-profit” and receives a stipend for attending its meetings–courtesy of Mesa’s ratepayers.
Shoenberger argues that the agency’s support of CalDesal is no different than its support of many other non-profits…like the Orange County Business Council, another non-profit the agency joined shortly after Shoenberger became GM. Membership dues, staff time, stipend pay…it all adds up to an agency that has money and time to waste.
From my examination of public records, Shoenberger spends too much of the ratepayers’ time and dime promoting desalination and not enough time looking out for the interests of the agency that pays him over $230,000 per year.
Much of Shoenberger’s time is spent serving on the boards of outside organizations, as chair of the ACWA (Association of California Water Agencies) desalination sub-committee, as a member of the New Water Supply Coalition (another desalination lobby group), and as a board member of the Affordable Desalination Collaboration (a laughable oxymoron as desalinated water is many times more expensive than any other water source). District resources support all of his outside desalination activities including his many speaking engagements and conferences within and outside the state.
Shoenberger and his board have also seen fit to reward consultants and contractors of Poseidon with Mesa contracts. At a recent committee meeting, board president Jim Fisler and director Dewane recommended that Mesa hire Richard Brady and Associates, the same outfit that completed modeling work for Poseidon.
Mesa also uses Poseidon pollster Adam Probolsky who conducted a “push” poll to demonstrate public support of ocean desalination (of course, the ratepayers who were polled were not told the cost of the proposed water or project). Probolsky works closely with Roger Faubel, a PR consultant who has worked for Poseidon for the past decade and who himself is on the Board of Directors of Santa Margarita Water District. Faubel also does work for Mesa. And last summer Mesa hired Phil Lauri who was the manager of West Basin’s Ocean Desalination program.
In earlier times, the media or enforcement agencies might have taken note of the many flagrant violations of public trust at Mesa, but not today.
Today, Mesa operates with impunity, even when it meets in anonymity–which it often does.
Since Paul Shoenberger became Mesa Water’s general manager, its board members have conducted at least 16 illegal closed-door sessions to discuss Poseidon.
Shawn Dewane refuses to comply with lawful public records act requests regarding CalDesal.
Adding insult to injury, the inquiring public is treated to rude remarks from the board, both in their presence and when they are unable to hear or respond.
The truth about Mesa’s obsession with the Poseidon project is obfuscated by its lack of transparency.
But what can we do about it?
Since the public can no longer look to the mainstream media, or to the District Attorney, or to the State Attorney General, it is up to each of us to participate in the democratic process, to attend Mesa Water meetings, to question, to expose wrong doing, and to propose constructive solutions.
As Mahatma Gandhi said, “Truth never damages a cause that is just.”
Let the truth about Mesa Water be told.
Debbie Cook is a former mayor of Huntington Beach and an advocate for greater transparency in public water management.
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.
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.
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.
Environmental attorney Debbie Cook is a former Huntington Beach City Council member and two-term mayor of that city. She served on California’s State Desalination Task Force and as a city official voted against the ocean desalination plant proposed by Poseidon Resources Inc. Cook has been monitoring government transparency at local water districts. She made these public comments at a special meeting held by the Board of Directors of the Municipal Water District of Orange County (MWDOC), May 15, 2012, in the penthouse floor that lodges the offices of MWDOC’s legal counsel, Best Best & Krieger. She addressed the board’s postponement of a closed session item concerning water rate negotiations between MWDOC and Posedion Inc. after receiving protests. Cook explains why that meeting would violate the Brown Act, which requires government agencies to hold meetings open to the public.
There has been an unsettling trend among water agencies to conduct more and more of the people’s business in closed session under the guise of the “real estate negotiations” exception. While you can always pay an attorney to argue any absurd position, I urge you to reconsider such a course.
The Brown Act allows very narrow exceptions to conducting the public’s business in public and the real estate exception is perhaps the most narrowly drawn of all of them.
Poseidon is not selling, nor are you buying, real estate or real property within the meaning of the legislature’s intent. It is a contorted analysis that says otherwise.
Real Property is land and whatever is erected or growing on or affixed to it. But once severed from the land, things that are growing or attached to it are considered “goods.”