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Carlsbad Seawater Desalination

Project Status Report

Water Planning Committee

July 26, 2012

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Today's Status Report on Carlsbad Desalination Project

1. Status of WPA Negotiations

2. Status of Due Diligence Activities

3. Other Project Related Issues

4. Upcoming Board and Other Public Meetings

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Status of Negotiations for a Water Purchase Agreement Final Draft Agreement under production

All major deal points and key provisions previously reviewed by Board Advisory Group

Commercial terms

Economic terms

Resizing of minimum annual commitment to 48 TAF included in final draft

Technical appendices near completion

Due Diligence status

Finalizing financial pro-forma assumptions to reflect terms and conditions of Draft WPA

Poseidon finalizing price for construction and operations based on Water

Authority direction

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Other Carlsbad Desalination Project Related Issues Bond and Financing Process Advancing

Draft documents prepared and under review

Ensure Project is investment grade

BBB- or better

July 26th Water Planning Committee

Energy Pricing Workshop

SWRCB development of intake and discharge guidelines for seawater desalination at July 26 Water Planning

Draft Design Build Agreement for conveyance pipeline being developed

Pricing for improvements at Twin Oaks WTP under discussion

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Other Carlsbad Desalination Project Related Issues (Continued) Incorporation of Carlsbad desalination into rates and charges

Presented workshop information to member agency managers

Meet again with member agency managers and finance officers in August

Return to Board at August meeting with information item on alternatives and member agency comments

Contracts with member agencies for purchase as local supply

Meeting scheduled with interested member agencies on July 31st

Provide draft Water Authority – Member Agency agreement in August

60 day member agency review period begins with distribution of Draft WPA

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Upcoming Meetings

August 9th Board workshop

Overview of Key Provisions in Draft WPA

Assignment of risk to the parties

Detailed discussion on pricing

August Regular Board Meeting

Continue discussion on incorporation into rates and charges

Presentation on desalination and supply reliability

Update on member agency local supply planning

September Regular Board Meeting

Continue discussion on key provisions of Draft WPA

Review actions related to Pipeline 3 rehabilitation, Twin Oaks and other

distribution system activities

September Public Meetings (Two)

Evening Water Planning Committee meeting in Carlsbad

Evening Water Planning Committee Meeting in Kearny Mesa

Water Planning Committee Meeting

July 26, 2012

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Current State Water Resources Control Board Regulatory Framework State Water Board regulates ocean intakes and

discharges

Intakes (California Water Code)

Discharges (NPDES permit and Ocean Plan)

Ocean Plan does not specifically address desalination nor does it have a salinity objective

Current regulations address desalination impacts

Carlsbad desalination project was fully permitted under existing regulatory structure

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Proposed Ocean Plan Amendment SWRCB has initiated a process to amend the ocean

plan to specifically address desalination projects

Identified as very high priority in Triennial Review

On-going planning for multiple ocean desalination facilities

Proposed components of amendments

Narrative objective for salinity (specific % over background)

Provisions to minimize marine life impacts

Implementation provisions

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State Water Board Amendment Process

Public meetings on the process held to date

Stakeholder Meeting - April 18, 2011

CEQA Scoping Meeting - March 30, 2012

State Board initiated a series of technical scientific studies to address information gaps related to proposed amendments

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Scientific Studies

1. Salinity Toxicity Studies

“Preliminary final draft” released on July 16, 2012

2. Expert Panel on Intake Impacts and Mitigation

Public meeting on November, 2011

Final report released March 14, 2012

3. Expert Panel on Impacts and Effects of Brine Discharges

Public meetings on July 5 and December 8-9, 2011

Final draft released March 2012

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Key Concerns Identified to Date Overall concerns

Proposed amendments need to recognize site-specific nature of projects

Intake

Expert panel conclusions generally consistent with Carlsbad permits

State Board acknowledges that not all technologies are feasible or cost effective at every site

Brine discharge

Salinity toxicity study findings generally concur with Carlsbad permit findings

Statewide salinity objective not appropriate Not based on site characteristics, including species tolerances

Proposed amendments need to allow flexibility to use different salinity mitigation strategies

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Public Involvement Stakeholder engagement

Water Authority

CalDesal

Desalination agencies

Environmental groups

Poseidon Resources

Technical studies review under way

CalDesal agencies and experts reviewing to identify specific concerns

Comment letters to the Board will be prepared

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Schedule and Next Steps

Public Workshop on August 22nd in Sacramento

Present findings of scientific studies

Public comments

Public review draft and comment period

Public hearing before State Water Board