Carlsbad, CA (Dec.14, 2016) – In its first year of operations, the nation’s largest and most technologically advanced seawater desalination plant produced enough high-quality, drought-proof water from the Pacific Ocean to meet approximately 10 percent of the region’s demand. The Claude “Bud” Lewis Carlsbad Desalination Plant quickly generated significant benefits by relieving pressure on imported water supplies, reducing state mandates for emergency conservation measures in March and helping the region pass the state’s stringent water supply “stress test” in June.

After completing construction on schedule, the plant was dedicated on Dec. 14, 2015, in front of more than 600 elected officials, community leaders and project partners. The facility – named after the late Carlsbad mayor who also served as Water Authority Board chair – soon garnered local and international accolades. It was honored in April 2016 with a Global Water Award as the Desalination Plant of the Year by Global Water Intelligence for “the most impressive technical or ecologically sustainable achievement in the industry.” In June, the San Diego County Taxpayers Association recognized the desalination project with its highest honor – the Grand Golden Watchdog – for “stretching taxpayer dollars through cooperation between the public and private sectors.” And in July, Poseidon was named an Energy Champion by San Diego Gas & Electric (SDG&E) for its “remarkable commitment to sustainability, energy efficiency and conservation.”

During its first year, the Carlsbad plant produced nearly 15 billion gallons of fresh water – approximately 45,000 acre-feet – for the San Diego region during one of the most severe droughts in state history.

“This plant is a game-changer for San Diego County,” said Mark Muir, chair of the San Diego County Water Authority’s Board of Directors. “It’s gratifying that this visionary investment our region’s ratepayers strongly supported is paying dividends now, and we expect it to continue to do so for decades to come.

“The desalination plant also underscores our region’s commitment to reducing reliance on imported water from the Sacramento-San Joaquin Bay-Delta and meeting the objectives of the state’s Water Action Plan. Every drop of water we produce locally is a drop that we don’t need to import from outside the region.”

The Carlsbad Desalination Plant is the result of a 30-year, public-private partnership between the plant’s developer and owner, Poseidon Water, and the Water Authority for the production of up to 56,000 acre-feet of water per year – enough to meet the needs of approximately 400,000 people. It is a major component of the Water Authority’s multi-decade strategy to diversify the region’s water supply portfolio.

The $1 billion desalination project includes three main components: the desalination plant adjacent to NRG Energy’s Encina Power Station on Agua Hedionda Lagoon; a 10-mile pipeline that connects to the Water Authority’s regional distribution system; and upgrades to Water Authority facilities for distributing desalinated seawater throughout the region.

“This was a historic undertaking, and the plant’s first-year operation was a great success,” said Poseidon Water CEO Carlos Riva. “Seawater desalination is a viable option for coastal communities seeking to secure new, fresh water supplies. We have proven that it can be done, and are proud to mark this anniversary with our project partners at the Water Authority, IDE Technologies, Stonepeak Infrastructure Partners and Kiewit-Shea Desalination.”

Poseidon Water is a private company that partners with public agencies to deliver water infrastructure projects. The company’s primary focus is developing large-scale reverse osmosis seawater desalination plants. Poseidon is developing a second seawater desalination facility in Huntington Beach, Calif., that is in the final phase of the permitting process.

The Carlsbad plant uses reverse osmosis to produce a highly reliable supply, day-in and day-out, regardless of weather or climate conditions, and it is blended with water from other sources for regional distribution. It costs about a half-cent to produce a gallon of drinking water at the plant. Desalinated water costs typical homeowners in the region about an additional $5 per month, in line with the low end of projections when the project was approved in late 2012.

Since the drought of 1987-92, the Water Authority has transformed the region’s water supply mix through a long-term strategy to diversify its water supplies and enhance regional water infrastructure. Elements of the strategy include:

- Implementing the nation’s largest agriculture-to-urban water conservation and transfer agreement with the Imperial Irrigation District;

- Securing additional long-term, highly reliable Colorado River water supplies through canal-lining projects in the Imperial Valley;

- Assisting local member agencies in developing their own local water sources; and

- Helping reduce regional per capita potable water use by nearly 40 percent between 1990 and 2015 through legislation, education, incentives and other measures to promote conservation and water-use efficiency.

The strategy has worked so well that the San Diego region has sufficient water supplies to meet normal water demands after five years of drought, and it passed the state’s water supply “stress test” that assumes the drought will continue another three years.

Starting in the early 1990s, the Water Authority began investigating the potential for a desalination project along the county’s coastline. It identified the Carlsbad site as one of the most likely locations because of the existing seawater intake and discharge infrastructure used by the Encina Power Station and its location relative to the Water Authority’s distribution system. Poseidon Water spearheaded efforts to develop the Carlsbad site starting in the late 1990s.

To download photos, b-roll and other materials, go to https://www.carlsbaddesalination.online/media and log in using the email “guest@carlsbaddesal.com” and password “desalination”.

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The Carlsbad plant is the result of a 30-year Water Purchase Agreement between the plant’s developer and owner, Poseidon Water, and the San Diego County Water Authority for the production of up to 56,000 acre-feet of water per year. The agreement provided the assurances that Poseidon needed to secure funding for plant construction, most of which came from the sale of private bonds and a nearly $200 million private equity contribution from Stonepeak Infrastructure Partners.

The largest seawater desalination plant in the nation, it started commercial operations in December 2015 and is providing the San Diego region with a drought-proof water supply during one of the most severe droughts in California’s recorded history.

IDE Technologies, an international leader in water treatment solutions, operates the plant. Construction was carried out by Kiewit-Shea Desalination.

“The successful completion of the largest desalination plant in North America followed years of seemingly insurmountable technical, financial and legal hurdles,” according to Global Water Intelligence. “The tenacity shown by the developer team is matched only by the importance of seawater desalination as a key part of the solution to California’s water crisis. A canny combination of state-of-the art energy recovery technology with an external energy offsetting programme makes Carlsbad the first major infrastructure project in the state of California to completely neutralise its carbon footprint.”

Additionally, the project gained praise for Poseidon’s partnership with the U.S. Fish and Wildlife Service to create, restore and enhance 66 acres of vulnerable local wetland as part of the project scope.

Three main components comprise the $1 billion desalination project: the desalination plant adjacent to NRG Energy’s Encina Power Station on Agua Hedionda Lagoon; a 10-mile pipeline that connects to the Water Authority’s regional distribution system; and upgrades to Water Authority facilities for distributing desalinated seawater throughout the region.

The Carlsbad plant is a major piece of the Water Authority’s multi-decade strategy to diversify the region’s water supply portfolio. It utilizes reverse osmosis membrane technology to produce approximately 10 percent of the region’s water supply; it is a core supply regardless of weather conditions, and it is blended with water from other sources for regional distribution.

“We build projects to enhance the safety and reliability of water supplies for the San Diego region – not to win awards,” said Mark Weston, chair of the Water Authority’s Board of Directors. “But this kind of international acclaim helps to validate the years of work that went into making the Carlsbad project a stunning success. We could not have done it without the steadfast support of our community partners, our member agencies and the team that Poseidon put together.”

“Poseidon is honored to have received this recognition from so many of the industry’s leaders for what we accomplished in Carlsbad,” said Carlos Riva, chief executive officer of Poseidon Water. “The Claude ‘Bud’ Lewis Carlsbad Desalination Plant is truly a remarkable success as it will provide enough desalinated water to serve up to 400,000 San Diego County residents during this period of record drought.”

Since the drought of 1987-92, the Water Authority has transformed the San Diego region’s water supply mix by: implementing the nation’s largest agriculture-to-urban water conservation and transfer agreement with the Imperial Irrigation District; securing additional long-term, highly reliable Colorado River water supplies through canal-lining projects in the Imperial and Coachella valleys; and by assisting local member agencies in developing their own local water sources. In addition, the Water Authority has helped to reduce regional per capita potable water use by nearly 40 percent since 1990 through legislation, education, incentives and other measures to promote conservation. The strategy has worked so well that even in the fifth year of drought, the Water Authority has 99 percent of the water supplies it would need to meet normal demands this year.

Starting in the early 1990s, the Water Authority began investigating the potential for a desalination project along the county’s coastline. It identified the Carlsbad site as one of the most likely locations because of the existing seawater intake and discharge infrastructure used by the Encina Power Station and its location relative to the Water Authority’s distribution system. Poseidon Water spearheaded efforts to develop the Carlsbad site starting in the late 1990s.

To download photos, video and materials, go to https://www.carlsbaddesalination.online/media and login using the email “guest@carlsbaddesal.com” and password “desalination.”

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About Poseidon Water

Poseidon Water is a private company that partners with public agencies to deliver water infrastructure projects. The company's primary focus is developing large-scale reverse osmosis seawater desalination plants, and Poseidon is developing a second desalination facility in Huntington Beach, Calif. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks. For more information on the Carlsbad Desalination Project, visit the project website at www.carlsbaddesal.com. For more information on Poseidon’s Huntington Beach desalination plant visit the project website at HBfreshwater.com.

About the San Diego County Water Authority

The San Diego County Water Authority sustains a $218 billion regional economy and the quality of life for 3.2 million residents through a multi-decade water supply diversification plan, major infrastructure investments and forward-thinking policies that promote fiscal and environmental responsibility. A public agency created in 1944, the Water Authority delivers wholesale water supplies to 24 retail water providers, including cities, special districts and a military base. For more information, go to www.sdcwa.org.

About Stonepeak Infrastructure Partners

Stonepeak Infrastructure Partners is an independent private equity investment firm specializing in North American middle-market infrastructure. Stonepeak invests in businesses comprised of hard assets with strategic importance, primarily in the following sectors: Energy, Power & Renewables, Transportation, Utilities, Water & Communications. Stonepeak is based in New York. Visit www.stonepeakpartners.com for more information.

San Diego, CA – Today, Poseidon announced that their Senior Vice President of Project Development for California has been named one of Engineering News Record’s (ENR) ‘Top 25 Newsmakers.’ Every year, ENR salutes influencers in construction by naming the Top 25 Newsmakers who have been the most influential in their respective roles. MacLaggan was recognized for his tenacity and patience in pushing for the successful construction of the largest seawater desalination plant in the Western hemisphere in Carlsbad, California.“I am deeply honored to be named one of ENR’s Top 25 Newsmakers along with the best and the brightest minds in the industry,” said Peter MacLaggan, Poseidon Senior Vice President. “The Carlsbad project took over a decade to come to fruition and was truly a team effort. I want to thank everyone who helped San Diego County residents achieve desalination as a new drought-proof reliable source of water from the Pacific Ocean for future generations to come.”

Before the Carlsbad project, no large-scale seawater desalination plant had been permitted in California. Peter’s efforts allowed the project to receive the permits it needed to move forward and, ultimately, into construction. Under MacLaggan’s advisement, Poseidon was able to negotiate a 30-year water purchase agreement with the San Diego County Water Authority to provide up to 56,000 acre-ft of water per year—enough to supply more than 400,000 people and become a major component of the agency’s strategy to diversify its water portfolio.

Having worked in the water industry since the 1970’s, Peter’s knowledge of water issues shown through as a valuable asset to the project. He began as an engineer with a company that was one of the first to commercialize reverse-osmosis spiral-membrane technology, the technology used in desalination.

Poseidon’s desalination facility in Carlsbad, California began regular production in mid-December 2015 and is the largest, most technologically advanced and energy-efficient desalination plant in the nation. Poseidon is also currently awaiting a permit approval from the California Coastal Commission to begin work on similar facility in Huntington Beach.

Since 1964, at the end of each year, Engineering News-Record editors look through the stories that have appeared in ENR and select individuals for special recognition. See this year’s full list of ENR’s ‘Top 25 Newsmakers’.

Poseidon Water specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants in an environmentally sensitive manner. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks. For more information on Poseidon Water and the Carlsbad Desalination Plant, visit http://carlsbad-desal.com.

Carlsbad, CA (December 15, 2015) - With Monday's ceremonial opening of the Western Hemisphere's largest ocean desalination plant, a new era began for water use in San Diego County — and possibly for the entire parched state. California officials have been emphasizing water conservation, expansion of reservoirs and water recycling (irrigating landscapes with partially treated wastewater and even turning sewage into drinking water) as prime ways to survive the drought, which is about to enter its fifth year.

But seawater desalination has remained a minor part of the water supply puzzle. If the new facility in Carlsbad performs according to expectations, that could change. About 15 other desalination sites are being proposed in the state.

More than 600 dignitaries gathered at the site overlooking the Pacific Ocean to mark the occasion. Tributes came from elected officials such as Assembly SpeakerToni Atkins(D-San Diego). She highlighted the bipartisan support for the project, including backing by Assemblyman Rocky Chavez (R-Oceanside), whose district includes the plant.

"We've now established a model, not just for San Diego County but for other plants up and down the coastline, so that we can make sure California's future is bright and that we have the water we need," Atkins said.

Its official opening, tied to meeting certain performance standards, is expected in days. The plant is capable of producing 50 million gallons of fresh water daily, about 10% of the county's total water use.

Poseidon Water of Boston owns and operates the structure, which it built for $1 billion. The San Diego County Water Authority, the region's main water manager, is buying the desalinated water under a 30-year purchase agreement.
Called the Claude "Bud" Lewis Carlsbad Desalination Plant, the site is named for the late Carlsbad civic leader and mayor who was a major supporter of the project and once served as the water authority's chairman.
Over the years, the project also drew key support from a range of business leaders and labor unions.

It was opposed by various environmental groups, notably the Surfrider Foundation. These critics said desalination harms the environment and costs far more than water that is available from other sources.
Having failed to stop the Carlsbad plant, the environmentalists are trying to block Poseidon's next desalination project, planned for Huntington Beach.

The Carlsbad project has been overseen by Poseidon Vice President Peter MacLaggan, who was on hand Monday to celebrate completion of an undertaking that he spent nearly 15 years developing.
Despite the drought, San Diego County doesn't need the desalinated water right away.

The water authority actually has an excess of water this year because residents have curtailed use in response to Gov. Jerry Brown's conservation mandate and the county has a guaranteed supply of water imported from Imperial Valley.

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FOR THE RECORD
An earlier version of this story stated that Poseidon Water was based in Stamford, Conn. It is a Boston company. Also, it was stated that Poseidon Vice President Peter MacLaggan has been overseeing the project in Carlsbad and another in Huntington Beach. He has been heading only the Carlsbad project.
See the most-read stories this hour >>
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Carlsbad, CA (December 15, 2015) -

Water flowing underground — Talking Heads

At Monday’s symbolic faucet-turning in Carlsbad, the mood was triumphal.

Instead of emptying magnums of bubbly, however, the celebrants filled fancy plastic bottles with drinking water and carried them home as if H20 was actually Au, which in the Golden State it sort of is.
Boiled down, The Bud is now North County’s No. 1 wonder.

The alchemy it performs on an industrial scale, while not unique (Israel is the savvy desert guide), is rocking our world like an 8.0 earthquake.

“This is agoodday,” Assembly Speaker Toni Atkins declaimed inside a revival-style tent threatening to blow away in the biting wind. (She’d go on to say, “This is a very important day for us” and “This is a really great day for us.”)

To the congregation of the converted, the seawater factory is a not-so-little economic engine that can, a cool $1 billion public work that, nearly two decades in the distilling, will work as a supermodel for planned desalination plants up and down Alta and Baja California.

In a watery-eyed tribute to a late Carlsbad mayor who could win the next election posthumously, the factory next to the Encina Power Station was christened the Claude “Bud” Lewis Desalination Plant, a long name I’m pruning back to “The Bud.”

As Bud boosters turned a symbolic wheel and fake water flowed behind the stage, David Byrne of the Talking Heads sang, “Carry the water at the bottom of the ocean/Remove the water at the bottom of the ocean.”
The future glistened with hydrated promise.

The preening speechifying over, hundreds of well-tailored celebrants trudged up a hill to wait in line to fill their commemorative water bottles. They all had complete faith that ocean water had been scrubbed to its most basic molecules and then artfully recharged with harmless minerals. (Why? To make the potable water flow without leaching pipes — and to avoid disappointing buds unaccustomed to the taste of nothing.)

The world, circled by the white-capped Pacific and the Agua Hedionda Lagoon, seemed wondrous indeed.
About nine years ago, I conducted a reader poll to determine North County’s Seven Wonders, a local slant on the worldly handiwork of Philon of Byzantium, a pioneer of online lists.

The winners of my junk-science survey were formidable in their own rights: Mission San Luis Rey (the king of Father Serra’s pearl string of our original model homes); Palomar Observatory (the height of scientific star quality); Wild Animal Park (the pride of pastoral San Pasqual Valley); Lilac Road overcrossing (the inland county’s northern Golden Gate, just south of Rainbow); Highway 101 (the preserved siren road, more seductive than Route 66); Self-Realization Fellowship (the spiritual retreat of the lotus domes, sentries over Swami’s sacred break); and Oceanside’s pier (the longest such wood walkway on the West Coast).

Interestingly, neither of the region’s energy fortresses, Encina or San Onofre Nuclear Generating Station, made the cut, though a few pitches were made for SONGS. (One reader rhapsodized over the sight of “a giant concrete bra or bikini top arising from the shoreline where a Brobdingnagian beauty lay sunbathing below the power plant.”

Over time, it seems, our communal affection for utility workhorses dims. In a few years, Encina will be surgically dismantled (not imploded). Few will rend their clothes. On the other hand, cake walks will break out from San Clemente to Del Mar if SONGS could be trucked away along with its terrifying stored fuel.

After the tent revival, I wasn’t interested in joining the Elation Era soup line. I’d had a sip of Bud during a tour and found it very …watery. Clean taste with a clean finish. No legs.

Looking for an antidote to the joy at The Bud, I drove over to the Tamarack Beach parking lot where the Surfrider Foundation was trying to throw a skunk into the party a mile to the south.

On a day in which surfing was out of the question, attorney Marco Gonzalez, a longtime foe of desalination, repeated Surfrider’s long-held belief that desal is the most expensive, most damaging way to combat drought. In his view, conservation and recycling make more economic and environmental sense.

“We haven’t seen the end of this boondoggle,” Gonzalez said, his voice buffeted by the wind. “It’s going to cost us for years to come.”

Well, who really knows what the future brings? Every Jeremiah is right at least twice in his life. Time was, the praises of SONGS were sung.

Gonzalez pointed out that, during this severe drought, San Diego has never been more flush with water, nor have we ever paid more for it.

A dash of salt in the open wound of living in a desert we call home.

Carlsbad, CA (December 14, 2015) - In addition to covering life sciences for The San Diego Union-Tribune, Bradley J. Fikes has written about drought and other water issues. In today’s Back Story, he talks about his SD In Depth story about the significance of the new Poseidon desalination plant in Carlsbad.

Question: There have been lots of stories written over the years about the Poseidon undertaking. What prompted today’s package? Answer: It’s a gigantic milestone for ocean desalination in California. About a decade and a half of thought, planning, debate, opposition and a long series of crucial legal and administrative decisions — plus about $1 billion in financing — made the project a reality.

Question: What did you learn from reporting and writing this story? Were there any surprises? Answer: I was surprised at just how long and convoluted the approval and legal process was. There were immensely complicated issues, such as how to deal with environmental damage from the desalination plant.

But perhaps even more surprising was how complicated the political and financial process became. Poseidon had to get a firm commitment from customers whom bond buyers could trust. That turned out to be the San Diego County Water Authority, which alone had the financial rating and legal power to guarantee it would pay for the water. Getting to that commitment wended its way through attempts by the city of Carlsbad and then a coalition of North County cities and water agencies to purchase the water.

Question: You have tracked the Poseidon project since its inception. Were there times when you thought it would die? Answer: Yes, several times. The price of the project kept rising, from $270 million to finally about $1 billion. There were serious doubts about Poseidon’s capabilities after it ran into trouble with another desalination project in Tampa Bay, Fla. Environmentalists raised strong objections and filed lawsuits. Environmental lawyer Marco Gonzalez and the Surfrider Foundation were formidable and passionate foes.

Question: Having visited the desalination plant, what to you is the most interesting aspect there? Answer: The extensive filtering and chemical treatment process, which removes and precipitates solids so the water is ready for purification through reverse osmosis. There’s more stuff in seawater than I ever guessed, and taking it out is complicated. The reverse osmosis filters are also fascinating. Poseidon’s senior vice president in California, Peter MacLaggan, explained in detail to me how the filters work, getting down to the chemical properties of their different layers and the paths ionized molecules would take. It’s an engineer’s dream.

Question: Do you think the use of desalination will grow in our county, or will water recycling (turning sewage into drinking water) take the lead? Answer: My just-refurbished crystal ball says water recycling will take the lead, because it is just as safe as desalination but less expensive. Some of the technology is similar, specifically the reverse osmosis filtration part of it. Two decades ago, I drank purified sewage water produced by a recycling plant. The technology seemed to be nearing use by the city of San Diego. But public squeamishness scared away politicians, who could have led the public to accept it. Orange County’s leadership took a more enlightened approach and was able to persuade its citizens to accept the technology.

Question: Are there similarities in covering water issues and the biotech industry? Answer: In San Diego, they are joined at the hip. The region’s biotech industry got organized for the first time around 1990, during a drought. For a time, it appeared that the county’s water supply would be cut in half. This would have been catastrophic for biotech companies and research institutes.

So the executives emerged from their offices and the scientists from their labs to urge that biotech companies be guaranteed quality water, which is essential to their operations. I remember seeing them making their case before the San Diego City Council, which heeded their plea.

Question: What do you enjoy most about being a journalist, and what do you dislike the most? Answer: I like most learning about interesting subjects, such as biotech. I get to read the scientific publications and talk with the authors. It’s like a never-ending university.

What I dislike most is having to interrupt my learning to actually write the stories. It is fun to daydream about the science, but having to write it down and explain it in an accessible way is hard work.
I identify with the quip attributed to Dorothy Parker: “I hate writing, I love having written.”

Carlsbad, California (December 14, 2015) - Operations are under way at the nation's largest and most technologically advanced seawater desalination plant, which was dedicated today by more than 600 elected officials, community leaders and project partners. After successfully completing construction, the Claude "Bud" Lewis Carlsbad Desalination Plant has already produced more than 1.5 billion gallons of locally controlled water for San Diego County, helping to minimize the region's vulnerability to the statewide drought.

The Carlsbad Desalination Plant is the result of a 30-year Water Purchase Agreement between the plant's developer and owner, Poseidon Water, and the San Diego County Water Authority for the production of up to 56,000 acre-feet of water per year, enough to meet the needs of approximately 400,000 people. It is a major component of the Water Authority's multi-decade strategy to diversify the region'swater supplyportfolio

"Since the last major drought here a little over 20 years ago, the San Diego region has worked to conserve water as well as identify new water sources," said Atkins. "The Poseidon project not only provides San Diego County with a drought-proof water supply, it also demonstrates how California can meet the water needs of future generations."

The $1 billion desalination project includes three main components: the desalination plant adjacent to NRG Energy's Encina Power Station on Agua Hedionda Lagoon; a 10-mile pipeline that connects to the Water Authority's regional distribution system; and upgrades to Water Authority facilities for distributing desalinated seawater throughout the region. The plant provides a highly reliable water supply produced with state-of-the-art technology to reduce energy demands, and it will be the first water infrastructure project in the state to have a zero net carbon footprint.

The Carlsbad plant uses reverse osmosis to produce approximately 10 percent of the region's water supply; it is a core supply regardless of weather conditions, and it is blended with water from other sources for regional distribution. It costs less than 0.5 cents to produce a gallon of drinking water at the plant. Desalinated water will cost typical homeowners in the region about an additional $5 per month, in line with the low end of projections when the project was launched in late 2012. The costs are already factored into the Water Authority's 2016 rates.

"Dedication of the Carlsbad Desalination Plant marks a major milestone in California water history," said Mark Weston, chair of the Water Authority's Board of Directors. "The Water Authority and its member agencies have been aggressively diversifying the region's water supply for decades, and the Carlsbad Desalination Plant is a major component of that effort. We crafted a strategy of conservation and innovation in the early 1990s, and today it is protecting our $218 billion economy and the quality of life enjoyed by 3.2 million residents.

"The Claude ‘Bud' Lewis Carlsbad Desalination Plant opens a new chapter in water supply reliability for the San Diego region and the state by tapping the potential of the Pacific Ocean and reducing dependence on strained resources such as the Sacramento-San Joaquin Bay-Delta. It is bolstering the San Diego region's self-reliance, and in turn, its future."

Since the drought of 1987-92, the Water Authority has transformed the region's water supply mix by: implementing the nation's largest agriculture-to-urban water conservation and transfer agreement with the Imperial Irrigation District; securing additional long-term, highly reliable Colorado River water supplies through canal-lining projects in the Imperial Valley; and by assisting local member agencies in developing their own local water sources. In addition, the Water Authority has helped to reduce regional per capita potable water use by 39 percent since 1990 through legislation, education, incentives and other measures to promote conservation. The strategy has worked so well that even in the fifth year of drought, the Water Authority has 99 percent of the water supplies it would need to meet normal demands this year.

Poseidon Water is a private company that partners with public agencies to deliver water infrastructure projects. The company's primary focus is developing large-scale reverse osmosis seawater desalination plants, and Poseidon is developing a second desalination facility in Huntington Beach, Calif.

The Carlsbad Desalination Project included 1.5 million hours of work in Carlsbad, Vista and San Marcos, supporting an estimated 2,500 jobs and infusing $350 million into the local economy. Project partners included the Water Authority, Poseidon Water, IDE Technologies, Stonepeak Infrastructure Partners and Kiewit-Shea Desalination. After 30 years of operation at the Carlsbad plant, the Water Authority has the option – but not the obligation – to purchase the plant for $1. The agency also has the right to buy the facility after 10 years, though it isn't required to do so.

Starting in the early 1990s, the Water Authority began investigating the potential for a desalination project along the county's coastline. It identified the Carlsbad site as one of the most likely locations because of the existing seawater intake and discharge infrastructure used by the Encina Power Station and its location relative to the Water Authority's distribution system. Poseidon Water spearheaded efforts to develop the Carlsbad site starting in the late 1990s.

"This pioneering project is the result of more than 17 years of planning, permitting and construction," said Poseidon Water CEO Carlos Riva. "It required teamwork between Poseidon Water, the Water Authority, our contractors, NRG Energy, and the cities of Carlsbad, Vista and San Marcos. Together, we are proud to provide a vital resource for the San Diego region."

The plant will be operated by IDE Technologies, an international leader in water treatment solutions.

"IDE Technologies is thrilled to bring its experience designing and operating some of the world's most advanced seawater desalination plants to the United States," said IDE Americas Inc. CEO Mark Lambert. "With operations under way in Carlsbad, we are putting the ‘Pacific on tap' for San Diego County, bolstering the region's water reliability for decades to come."

NRG, a Fortune 200 energy company, is hosting the desalination plant as owner of the six-acre site where it sits.

"It is exciting to be part of a historic effort likes this one that will serve the San Diego region for decades to come," said John Chillemi, NRG's regional president. "NRG is proud to have played a role in this important project and appreciates our partnership with Poseidon to help make it happen."

Today's dedication event included naming the plant in honor of the late Carlsbad Mayor Claude "Bud" Lewis, who was instrumental in making Carlsbad the host city for the plant. The plant's name was kept confidential until the program. Lewis' family members accepted a plaque in the mayor's memory, and they thanked Poseidon, the Water Authority and the City of Carlsbad for recognizing his legacy. The event culminated with a "turning of the wheel" to symbolize the start of water delivery.

Major sponsors of the dedication event included IDE Technologies, Kiewit-Shea Desalination, and Arcadis US.

For more information, go to the project website, carlsbaddesal.com, or to the Water Authority's website, sdcwa.org.

Carlsbad, CA (Dec.14, 2015) – Operations are under way at the nation’s largest and most technologically advanced seawater desalination plant, which was dedicated today by more than 600 elected officials, community leaders and project partners. After successfully completing construction, the Claude “Bud” Lewis Carlsbad Desalination Plant has already produced more than 1.5 billion gallons of locally controlled water for San Diego County, helping to minimize the region’s vulnerability to the statewide drought.

The Carlsbad Desalination Plant is the result of a 30-year Water Purchase Agreement between the plant’s developer and owner, Poseidon Water, and the San Diego County Water Authority for the production of up to 56,000 acre-feet of water per year, enough to meet the needs of approximately 400,000 people. It is a major component of the Water Authority’s multi-decade strategy to diversify the region’s water supply portfolio.

To commemorate the historic occasion, dozens of state and local elected officials, including California Assembly Speaker Toni Atkins, attended today’s event.

“Since the last major drought here a little over 20 years ago, the San Diego region has worked to conserve water as well as identify new water sources,” said Atkins. “The Poseidon project not only provides San Diego County with a drought-proof water supply, it also demonstrates how California can meet the water needs of future generations.”

The $1 billion desalination project includes three main components: the desalination plant adjacent to NRG Energy’s Encina Power Station on Agua Hedionda Lagoon; a 10-mile pipeline that connects to the Water Authority’s regional distribution system; and upgrades to Water Authority facilities for distributing desalinated seawater throughout the region. The plant provides a highly reliable water supply produced with state-of-the-art technology to reduce energy demands, and it will be the first water infrastructure project in the state to have a zero net carbon footprint.

The Carlsbad plant uses reverse osmosis to produce approximately 10 percent of the region’s water supply; it is a core supply regardless of weather conditions, and it is blended with water from other sources for regional distribution. It costs less than 0.5 cents to produce a gallon of drinking water at the plant. Desalinated water will cost typical homeowners in the region about an additional $5 per month, in line with the low end of projections when the project was launched in late 2012. The costs are already factored into the Water Authority’s 2016 rates.

“Dedication of the Carlsbad Desalination Plant marks a major milestone in California water history,” said Mark Weston, chair of the Water Authority’s Board of Directors. “The Water Authority and its member agencies have been aggressively diversifying the region’s water supply for decades, and the Carlsbad Desalination Plant is a major component of that effort. We crafted a strategy of conservation and innovation in the early 1990s, and today it is protecting our $218 billion economy and the quality of life enjoyed by 3.2 million residents.

“The Claude ‘Bud’ Lewis Carlsbad Desalination Plant opens a new chapter in water supply reliability for the San Diego region and the state by tapping the potential of the Pacific Ocean and reducing dependence on strained resources such as the Sacramento-San Joaquin Bay-Delta. It is bolstering the San Diego region’s self-reliance, and in turn, its future.”

Since the drought of 1987-92, the Water Authority has transformed the region’s water supply mix by: implementing the nation’s largest agriculture-to-urban water conservation and transfer agreement with the Imperial Irrigation District; securing additional long-term, highly reliable Colorado River water supplies through canal-lining projects in the Imperial Valley; and by assisting local member agencies in developing their own local water sources. In addition, the Water Authority has helped to reduce regional per capita potable water use by 39 percent since 1990 through legislation, education, incentives and other measures to promote conservation. The strategy has worked so well that even in the fifth year of drought, the Water Authority has 99 percent of the water supplies it would need to meet normal demands this year.

Poseidon Water is a private company that partners with public agencies to deliver water infrastructure projects. The company’s primary focus is developing large-scale reverse osmosis seawater desalination plants, and Poseidon is developing a second desalination facility in Huntington Beach, Calif.

The Carlsbad Desalination Project included 1.5 million hours of work in Carlsbad, Vista and San Marcos, supporting an estimated 2,500 jobs and infusing $350 million into the local economy. Project partners included the Water Authority, Poseidon Water, IDE Technologies, Stonepeak Infrastructure Partners and Kiewit-Shea Desalination. After 30 years of operation at the Carlsbad plant, the Water Authority has the option – but not the obligation – to purchase the plant for $1. The agency also has the right to buy the facility after 10 years, though it isn’t required to do so.

Starting in the early 1990s, the Water Authority began investigating the potential for a desalination project along the county’s coastline. It identified the Carlsbad site as one of the most likely locations because of the existing seawater intake and discharge infrastructure used by the Encina Power Station and its location relative to the Water Authority’s distribution system. Poseidon Water spearheaded efforts to develop the Carlsbad site starting in the late 1990s.

“This pioneering project is the result of more than 17 years of planning, permitting and construction,” said Poseidon Water CEO Carlos Riva. “It required teamwork between Poseidon Water, the Water Authority, our contractors, NRG Energy, and the cities of Carlsbad, Vista and San Marcos. Together, we are proud to provide a vital resource for the San Diego region.”

The plant will be operated by IDE Technologies, an international leader in water treatment solutions.

“IDE Technologies is thrilled to bring its experience designing and operating some of the world’s most advanced seawater desalination plants to the United States,” said IDE Americas Inc. CEO Mark Lambert. “With operations under way in Carlsbad, we are putting the ‘Pacific on tap’ for San Diego County, bolstering the region’s water reliability for decades to come.”

NRG, a Fortune 200 energy company, is hosting the desalination plant as owner of the six-acre site where it sits.

“It is exciting to be part of a historic effort likes this one that will serve the San Diego region for decades to come,” said John Chillemi, NRG’s regional president. “NRG is proud to have played a role in this important project and appreciates our partnership with Poseidon to help make it happen.”

Today’s dedication event included naming the plant in honor of the late Carlsbad Mayor Claude “Bud” Lewis, who was instrumental in making Carlsbad the host city for the plant. The plant’s name was kept confidential until the program. Lewis’ family members accepted a plaque in the mayor’s memory, and they thanked Poseidon, the Water Authority and the City of Carlsbad for recognizing his legacy. The event culminated with a “turning of the wheel” to symbolize the start of water delivery.

Major sponsors of the dedication event included IDE Technologies, Kiewit-Shea Desalination, and Arcadis US.

###

San Diego Union Tribune

Carlsbad, CA (December 13, 2015) Poseidon Water’s desalination plant in Carlsbad is poised to begin regular operations within days — decades after water officials first considered harvesting drinking water from the sea and 14 years after they formally took the first steps toward its construction.

The opening, to be celebrated with an anticipatory ceremony Monday, will be a milestone for the company, for arid San Diego County and for all of California.

The San Diego region, which imports most of its water, will enter a new era in its quest for a reliable supply of this precious and increasingly pricey commodity. For the first time, a significant portion of its water supply will come from the sea.

Poseidon will sell the fresh water it produces to the San Diego County Water Authority, the region’s main provider. The authority will resell that water to retail districts that serve residents, schools and businesses. The Poseidon plant can create up to 50 million gallons of fresh water a day; that’s about 8 percent to 10 percent of the county’s overall supply.

For California, the Poseidon plant represents the mainstreaming of seawater desalination in California. Ocean desalination has long been used in nations such as Saudi Arabia, Australia and Israel, where the company that designed the Carlsbad plant, Israel Desalination Enterprises, is based. Israel’s extensive use of desalination to conquer a seemingly perpetual drought has become an internationally recognized success story.

California may be poised to join the trend. About 15 other desalination projects have been proposed for the state’s coastline, from the San Francisco Bay Area to Southern California. The figure doesn’t include those in Mexico that would serve San Diego County to varying degrees.

And for Poseidon, successfully operating the largest desalination plant in the Western Hemisphere would demonstrate that large-scale ocean desalination is feasible in California. It could strengthen the company’s case for building a similar facility in Huntington Beach.

While desalination of brackish water has been common, seawater desalination has been mostly confined to niche applications where no other source of water is available, such as on Catalina Island.

Along with other steps that San Diego County officials have taken or hope to take, from buying water from Imperial Valley farmers to potentially recycling wastewater into tap water, ocean desalination could give the region greater control over its water destiny.

That prospect comes at a steep price: Altogether, the undertakings will cost billions of dollars. Business, agricultural and residential water utility customers will bear these expenses.

Water from the Poseidon plant costs about twice as much as water purchased from the Metropolitan Water District of Southern California, the region’s largest water wholesaler.

Ocean desalination is also more expensive than the drinking water recycled from sewage, from which the city of San Diego plans to get one-third of its drinkable water by 2035. Previous city leaders rejected the option, fearing a public backlash over what some dubbed “toilet to tap.”

San Diego Mayor Kevin Faulconer — urged on by regulators, environmentalists, the life-sciences industry and others — has decided that the need for water recycling is too great to continue passing it up. He and the City Council last month supported a multi-year increase in water bills partly to pay for expansion of the recycling infrastructure, which is expected to grow from a single-site pilot project to a network of filtration plants, pumps and pipelines.

NUMBERS
$1 BILLION:Final cost for the building project, which includes a 10-mile pipeline connecting the plant to the county’s water-distribution system.

50 MILLION:Maximum amount of potable water (in gallons) the facility can produce each day; that’s 8 percent to 10 percent of the county’s entire water supply.

$2,000:Approximate cost of an acre-foot of water from the new desalination plant, which is about double what the Metropolitan Water District of Southern California charges for the same amount of water from its supply.
48,000:Minimum number of acre-feet of desalinated water the San Diego County Water Authority has agreed to buy each year, for 30 years, from Poseidon.

15:Proposed desalination sites along California’s coastline.

Critics of the Poseidon plant in Carlsbad said its technology uses enormous amounts of electricity, harms marine life and locks San Diegans into a costly option that they could have avoided entirely. They said for years the region’s elected officials and water managers should have put more stress on everyday conservation while being more aggressive in starting water recycling.

End of the pipeline

San Diego County has always been vulnerable to drought because it has little water of its own and is located at the end of the pipeline for imported water.

This vulnerability didn’t hit home until the late 1980s. Until then, the Metropolitan Water District had proved to be an extremely reliable source of water. In most years, there was an abundance, and in lean years there was still enough to scrape by.

That changed with the severe drought of 1987 to 1992.

By 1991, Metropolitan board members were seriously discussing a proposal to cut water deliveries to its member agencies by 50 percent. Since the agency supplied about 95 percent of the water used in the county, that would have represented a ruinous cutback.

By contrast, the city of Los Angeles was less vulnerable. The city had secured its own municipal supply decades ago from the Owens Valley, and used Metropolitan water as a secondary source.
That 50 percent cut never materialized, thanks to the last-minute storms that produced what went down in history as “Miracle March” in 1991.

The county water authority resolved to get the county out of that vulnerable position by diversifying its supply. This included conserving water and securing supplies from outside Metropolitan. Ocean desalination became part of that mix of options.

The Poseidon plant arose out of two events at the turn of the century. One, Poseidon began a feasibility study in 2000 about building a desalination plant in Carlsbad by the Encina power plant, the location that was ultimately chosen. Two, the San Diego County Water Authority voted in 2001 to spend $50,000 to search for good locations for a desalination plant.

The Carlsbad site had the significant advantage of being able to piggyback on an existing seawater intake and return system, used to cool the power plant. That meant the desalination plant should have less of an environmental impact than at other coastal locations. Moreover, the city of Carlsbad was interested in securing the water.

Then as now, desalination cost more than other sources of water. But the difference had narrowed considerably by 2001.

In 1991, Southern California Edison shut down an experimental seawater desalination plant it built on Catalina Island. The desalted water produced by that facility cost about $3,000 per acre-foot.

In 2001, Poseidon reported having reduced that expense to about $560 per acre-foot, about 7 percent more than the $521 per acre-foot that members of the county water authority paid for water at the time.
An acre-foot is about 326,000 gallons of water — what two average single-family households use in a year.
Busting the budget

MILESTONES
2000:Boston-based Poseidon conducts feasibility study on building a seawater desalination plant on the grounds of the Encina Power Station.

2001:San Diego County Water Authority approves $50,000 in spending to identify promising locations for a desalination facility.

2006:Carlsbad gives OK to desalination plant. A coalition of environmentalists sues the city over that approval.

2008:California Coastal Commission approves the Poseidon project. So does the State Lands Commission. Surfrider Foundation and the Planning and Conservation League file suit against the Coastal Commission, seeking a reversal of the agency’s decision.

2009:Another key agency, the San Diego Regional Water Quality Control Board, grants a permit for the desalination facility.

2012:San Diego County Water Authority approves a 30-year water purchase agreement with Poseidon. Financing for the project closes in December. Also, the final pieces of litigation against the project are resolved.

2013:Construction begins on the facility and surrounding infrastructure.

2015:Plant conducts test runs in November and December, leading up to Monday’s scheduled start of normal operations.

In the early 2000s, the Poseidon plant was estimated to cost about $270 million, a figure that rose to $300 million, to $530 million and finally to about $1 billion. One environmentalist critic, Peter Gleick, named it one of the “zombie” water projects that would never get built, but never die.

However, the price for other sources of water also went up, and continued shortages of imported water drove home the desirability of a local source.

Now, 14 years later, the actual cost of Poseidon’s desalination water turned out to be about $2,000 an acre-foot, while water from Metropolitan costs about half that. Plans for the desalination plant were changed, environmental mitigation added in, and energy costs to run the plant also rose.

Years of planning reviews and public hearings lay ahead, along with protests and lawsuits over potential environmental harm, along with a temporary halt to talks between the county water authority and Poseidon in 2006. This was prompted by a decision of the power plant’s owner to replace it with a new facility that didn’t need seawater for cooling. The switch made an environmental impact report based on the earlier assumption no longer valid.

“Please know that this board is fully committed to seawater desalination as an important water supply for the county, but we will no longer pursue such a facility in Carlsbad.,” wrote then-water authority Chairman James Bond in an opinion article in the North County Times. “Rather, we will focus our seawater desalination efforts in other parts of the county and work closely with our member agencies on other local water supply projects.”
At that time, it looked like Poseidon and the city of Carlsbad might conclude their own deal. But Carlsbad by itself lacked the financial heft the county water authority carried, essential for financing the project.

Poseidon pushed ahead, and in 2008 won a critical approval from the California Coastal Commission, which had previously been skeptical of the project. Other good news for Poseidon swiftly followed.

In 2009, the San Diego Regional Water Quality Control Board unanimously approved a permit for the plant, lawsuits against the plant were rejected and various local water agencies signed on to buy water from Poseidon.

However, those agencies struggled to conclude a workable deal, so they asked the county water authority to help. That agency stepped in, and after months of negotiations approved a term sheet setting the general conditions, followed by more negotiations. Final approval came on Nov. 29, 2012.

New environment

The three years since that approval have both confirmed and challenged assumptions that went into the desalination project.

Extended drought has confirmed that San Diego County needs more local sources of water to provide a reliable supply. But now that the water is available, local water agencies may not benefit as they anticipated — at least in the short term.

Under Gov. Jerry Brown’s executive order for the drought, water agencies must cut back an average of 25 percent from residential water use of two years ago. That mandate is strictly based on past usage, and doesn’t take into account any new sources of water that a region may have been able to secure.

The county water authority and other civic leaders said this arrangement is unfair, pointing to the billions of dollars they have spent on water reliability programs during the past 25 years. Those efforts have allowed the region to lower its demand for water from Northern California and the Metropolitan Water District.

Such investments should be recognized with lower conservation targets, the local leaders said.
Brown has given general assurances that he will make adjustments once the existing conservation mandate expires in February.

He hasn’t specified whether San Diego County’s water-reliability programs, including the new supply from the Poseidon facility in Carlsbad, will influence his calculations. And if the much-heralded El Niño storms don’t relieve the drought by January, Brown said he will extend the conservation mandate.

Carlsbad, CA (December 12. 2015) - The newest weapon in the war on drought in California has arrived, an engineering marvel that will harvest drinking water from the ocean on a scale never before seen in the Western Hemisphere.

A giant water desalination plant will open this week north of San Diego, tucked behind a power plant across the street from Tamarack State Beach. It will produce 50 million gallons of fresh water each day, meeting 7 percent to 10 percent of the San Diego County Water Authority’s demands and buffering the region against supply shortages for decades to come.

Oh, and it will be expensive – ridiculously so, in the minds of some critics. Built by privately ownedPoseidon Water of Bostonfor $1 billion, the plant will deliver some of the priciest water found anywhere in California. It will cost twice as much as the water San Diego gets from the Metropolitan Water District of Southern California, which provides the bulk of San Diego’s supplies.

Yet San Diego officials say the Carlsbad project, representing a comparatively small slice of its overall water supply, will add only a few dollars a month to customer bills. Besides, with Metropolitan’s prices relentlessly rising, San Diego officials say desalination eventually will become competitive with the region’s other water sources.

What’s happening in Carlsbad could have implications for statewide water policy. The first major desalination facility built in California and the largest in the Western Hemisphere, it could establish desalination as a potentially major tool in solving the state’s long-term water stress.

“I think we’ve blazed a trail,” said Sandy Kerl, deputy general manager of the San Diego water authority. “It’s being watched with a lot of interest.”

The public will get its first glimpse at the grand opening Monday. Commercial operations will start later this month, with the arrival of the first flows of desalinated water at the authority’s aqueduct 10 miles inland. It marks a pivotal moment in a journey that began 15 years ago, when the plant was initially proposed.
“If it’s successful, as I believe it will be, others will follow,” said Peter MacLaggan, the Poseidon vice president overseeing Carlsbad.

Until now, desalination has produced just a trickle of California’s water supply. Although the technology has been around for centuries, it requires a lot of energy, the process is expensive and normally cheaper water is available from conventional sources. It’s also controversial among environmentalists, who say fish and other marine life can be harmed when seawater is sucked into the plants and leftover brine is discharged into the ocean.

California has just two dozen small desalination plants, most of them inland facilities that clean up brackish groundwater. In fact, only one significant desalination plant operates in the United States, a Tampa facility half the size of Carlsbad’s.

The Tampa plant has had something of a troubled history. Poseidon was its original developer but was replaced after financial problems arose with two of its contractors. It took years for the plant to get up to full speed. San Diego officials researched the problems in Tampa before they signed up with Poseidon and say they’re confident in the company’s abilities.

“We didn’t just walk into this,” Kerl said.

Desalination has a far more accomplished track record in other parts of the world. It’s practically a mainstay in the parched Middle East and generates 70 percent of Saudi Arabia’s drinking water and 25 percent of Israel’s. It’s no coincidence that a leading Israeli desalination company, IDE Technologies, will operate the Carlsbad plant.

“In the Middle East, they have no options,” said Tom Pankratz, an industry consultant in Houston and editor of the Water Desalination Report.

Now, because of drought and the specter of climate change, California’s options appear more limited and desalination is getting a fresh look.

State policy encourages it: Proposition 1, the$7.5 billion water bond measureapproved by voters in 2014, allocates $100 million to help local water agencies build desalination plants. Several coastal communities are looking at building small desalination plants. Santa Barbara is planning toreopen a small plantthat ran for three months in 1992 and got mothballed after the early-1990s drought ended.

“It’s because of the severe drought we’re in,” said city project engineer Bob Roebuck. “That’s the entire motivation. Our water reservoirs are extremely low.”

A ‘drought-proof’ supply

Still, it seems unlikely that desalination plants will become a major feature of California’s fabled coastline anytime soon. The Carlsbad project endured 14 lawsuits and more than a decade of negotiations and red tape before Poseidon could break ground. Construction took three years.

Along the same lines, Poseidon has been working for years to clear regulatory hurdles on a plant it is proposing in Huntington Beach, a project about the size of Carlsbad’s. It has the tentative blessing of local officials, but a green light from the state is anything but assured.

California appears to be of two minds about desalination. While state officials are offering Proposition 1 dollars for plant construction, the environmental regulations remain formidable.

Poseidon’s Huntington Beach project is running into resistance over the design of its intake valves. A new state policy, implemented earlier this year by the State Water Resources Control Board, says the valves should be built underneath the ocean floor, if feasible. That would keep fewer fish and larvae from getting sucked into the plant’s mechanism. (Carlsbad got its permits before the policy was approved and doesn’t have this “subsurface” intake feature.)

This isn’t a small point. Poseidon, citing a recent report from anindependent scientific panel,says installing intake valves beneath the ocean would create its own major environmental problems. The requirement also would kill the project’s economic viability by doubling construction costs to around $2 billion, according to the panel.

The intake design, and the entire project, face a crucial vote before the California Coastal Commission before the plant can proceed. The commission probably will vote next spring.

“I wouldn’t say it faces an uphill battle, but it faces a great deal of scrutiny,” said commission Chairman Steve Kinsey, a Marin County supervisor.

By then, the Carlsbad plant should have several months’ operational experience under its belt. Poseidon executives say the plant will prove the technology’s value once and for all.

YOU CANNOT MANAGE A COMMUNITY AND AN ECONOMY ON CONSERVATION ALONE.
Sandy Kerl, deputy general manager, San Diego County Water Authority

Now in its final testing phase, the plant will run in tandem with a nearby power plant, which draws cooling water from the ocean. Poseidon will take the water discharged by the power plant and pump it through a series of preliminary filters. The water then will flow into the heart of the Poseidon complex, the “reverse osmosis” building, where it will filter through paper-thin, plastic-coated membranes to remove the last vestiges of salt and other minerals. When the process is complete, the leftover brine will be diluted with ocean water and sent back to sea. The purified water will be fluoridated and chlorinated in preparation for delivery to the water authority.

The entire process will take an hour, said Poseidon vice president Scott Maloni.“It’s the only true drought-proof supply available, and it’s a half-penny a gallon,” he said.

Even so, desalination is expensive by California standards. Depending on how much it buys each year, San Diego has agreed to pay $2,131 to $2,367 an acre-foot for Poseidon’s desalinated water, including the cost of piping the finished product to the authority’s aqueduct. By comparison, Kerl said the authority pays just under $1,000 an acre-foot for water imported from Northern California and delivered to San Diego’s doorstep by Metropolitan. An acre-foot is 326,000 gallons.

San Diegans will begin seeing the financial impact in 2016. The costs of desalination are expected to increase the average residential bill, now around $80 a month, by about $5 a month.

State policymakers say there’s nothing necessarily wrong with expensive water – it encourages conservation. They’ve been frustrated, in fact, by a court ruling last spring that makes it harder for municipalities to impose substantial rate hikes to reduce consumption.

Nonetheless, environmentalists generally oppose desalination partly because of cost; they consider it an uneconomical, wasteful technology. Besides harming marine life, they say it consumes far too much energy. They want California to put greater emphasis on lower-cost recycling and conservation programs instead of finding new ways to expand consumption of water.

“There are less expensive alternatives; there are better alternatives,” said the Planning and Conservation League’s Jonas Minton, a former deputy director of the state Department of Water Resources.

The price of reliability

Critics also take issue with the particulars of San Diego’s deal with Poseidon, specifically the “take or pay” provision. The water authority’s contract obligates San Diego to buy at least 48,000 acre-feet of water each year from the Carlsbad plant, whether it needs it or not. The maximum purchase is 56,000 acre-feet annually.
Peter Gleick of the Pacific Institute, a water-policy think tank in Oakland, said San Diego’s deal reminds him of Australia’s zealous efforts to desalinate its way out of its 14-year “millennium drought.” He said six plants were built, at a cost of around $10 billion, but only two are operating now that the drought has ended.

“Four of them have been mothballed because they’re too expensive and they’re not needed,” Gleick said. “I think it’s premature for California to be going down that road.”

San Diego officials, however, staunchly defend the need for the plant, saying the time has come for a more diversified portfolio. The region has been among the leaders in the state on recycling and conservation, reducing per-capita water consumption by 39 percent in the past quarter-century. Officials say it’s time to expand supply.

“You cannot manage a community and an economy on conservation alone,” Kerl said.

Plunging into the desalination business also represents another step in San Diego’s quest for water independence. The water authority has had an uncomfortable relationship with Metropolitan, a powerful wholesale agency from Los Angeles that brings San Diego about half its water supply.

The relationship sometimes gets litigious. After San Diego cut a deal 12 years ago to buy water from farmers in Imperial County, it was required to pay hefty delivery fees to Metropolitan, which runs the canals connecting the two counties. San Diego challenged the fees in court, and a judge recently ruled that Metropolitan has beenovercharging San Diego to the tune of $188 million plus interest. Metropolitan is seeking a new trial.

I THINK IT’S PREMATURE FOR CALIFORNIA TO BE GOING DOWN THAT ROAD.
Peter Gleick, Pacific Institute

Kerl said the arrangement with Poseidon gives San Diego greater control over its own destiny. That includes costs. While the contract includes an escalator clause that’s expected to increase prices by as much as 2.5 percent a year, the rate hikes are capped at 30 percent over the 30-year life of the contract. There’s no such cap with Metropolitan, Kerl said.

“With the water with Met, we have no controls, or frankly, influence over what the cost is going to be,” Kerl said.

In addition, between the drought and environmental restrictions in the Sacramento-San Joaquin Delta, Metropolitan’s ability to deliver water from Northern California has become increasingly undependable, San Diego officials say. The area’s population has ballooned to 3.2 million, and Kerl said many San Diegans have keen memories of major supply cutbacks imposed by Metropolitan during the early 1990s drought.

“We’re not ever wanting to be in that position again,” Kerl said. “This is about the long haul.”

Monday’s dedication ceremony is expected to attract dignitaries such as Assembly Speaker Toni Atkins, a San Diego Democrat. Community leaders say the grand opening will shine a light on San Diego’s long-standing efforts to seize the initiative on water issues.

“In the Western Hemisphere, this is the biggest thing to happen in terms of manufacturing water in a long while,” said Jim Madaffer, a public affairs consultant in San Diego and member of the water authority board. “It is more expensive, but it’s the price you pay for water reliability long term.”

Carlsbad, CA (December 12, 2015) - It’s been there all along, the largest reservoir in the world, lapping at our shore but unavailable through drought after drought. Finally, on Monday, politicians and government officials, business leaders and residents will gather in Carlsbad to dedicate a $1 billion plant and pipeline connecting the Pacific Ocean to the San Diego County drinking water network. It is in many ways a remarkable and historic achievement. But it is hardly the end of the search for reliable, sustainable, drought-proof sources of affordable water for the future.

At its core, the Carlsbad Desalination Project borrows from a process that dates to the sailors of ancient Greece and that has been in use for decades at some 21,000 desal plants in more than 120 countries from Europe to the Middle East to Asia. It was even tried briefly here more than half a century ago when the Navy built a small desalination plant at the tip of Point Loma in 1962, only to have it taken apart two years later and shipped to the Navy base at Guantanamo Bay, Cuba, after dictator Fidel Castro cut off the base water supply.

The Carlsbad plant is this nation’s largest, capable of producing 50 million gallons of potable water every day, and the most technologically advanced. Its journey from a naively hopeful proposal by Poseidon Resources in December 2001 to flowing water this month was a tortuous 14-year slog of battles between Carlsbad and the San Diego County Water Authority, battles between Poseidon and the water authority, lawsuits galore by environmental groups, and regulatory hoop after regulatory hoop. It could have died at several points along the way.

But everyone persevered and those difficulties will likely get scant mention at Monday’s celebratory dedication. That’s fine, because there is much work still to be done to secure the region’s water future and it will require a unified partnership of political, governmental, business and citizen efforts to achieve.

Just what does “reliable, sustainable, drought-proof sources of affordable water” mean?

It means continuing the effort to reduce this county’s dependence on the region’s water wholesaler, the Los Angeles-based Metropolitan Water District, from 95 percent of our water in 1991 to 57 percent today to a hoped-for 18 percent by 2035. It probably means at least one more desalination plant — and one is in the early study stage at the SDCWA. It means successful development of water purification projects around the county that convert wastewater into drinking water. It means far greater use of recycled water. It means better management and development of groundwater. And it means even more consumer conservation.

All that is just at the local level. At the state level, it means resolution of the decades-long conflict over restoration of the endangered Sacramento-San Joaquin Delta, better management of rivers and groundwater and development of greater storage capacity. And, of course, better agricultural management. Do we really want, for example, to continue using huge quantities of cheap Colorado River water to grow water-intensive alfalfa in Imperial County that is then shipped to China?

All of that is necessary, along with a great public willingness to pay for it.

Monday is for celebrating the new desalination plant. Sincere congratulations. On Tuesday, it’s back to work.

When finished, the Carlsbad Desalination Project will be the largest, most technologically advanced and energy-efficient seawater desalination plant in the Western Hemisphere. It will produce up to 50 million gallons a day and account for about one-third of all the water generated in San Diego County, helping reduce reliance on imported water as part of the Water Authority’s multi-decade strategy to enhance the region’s water supply reliability. In 2020, the project will meet about 7 percent of the region’s water demand.

“Through the construction of the Carlsbad Desalination Project, we are working to deliver enough high-quality, fresh drinking water to serve approximately 112,000 San Diego County households,” said Peter MacLaggan, Vice President of Poseidon Water, the project’s private developer. “A project of this size is an enormous task that impacts the communities where we are working, and we would not be celebrating this milestone without the cooperation and support of the residents, businesses, property owners and city staff in Carlsbad, Vista and San Marcos.”

Pipeline installation began in spring 2013 in San Marcos, where street restoration is under way. Restorations are also occurring in Vista this month. Construction in Carlsbad, home to the largest portion of the pipeline, is ongoing. Crews recently installed a critical segment of pipeline along Cannon Road east of Interstate 5, and they are working around the clock to install pipeline along Faraday Avenue. Additionally, pipeline installation on South Melrose Drive began this month and is expected to continue through 2015.

“We are thrilled with the smooth progress of construction on this vital project,” said Maureen Stapleton, general manager of the Water Authority. “Current statewide drought conditions underscore the value of diversifying the water supplies that support our region’s 3.1 million residents, and the Carlsbad Desalination Project is an important part of our strategy to enhance water supply reliability.”

This $1 billion Carlsbad Desalination Project is the result of a 30-year Water Purchase Agreement between the Water Authority and Poseidon Water for the purchase of up to 56,000 acre-feet per year of desalinated seawater. It includes three main components: the desalination plant, the pipeline, and about $80 million in upgrades the Water Authority is making to its facilities so it can distribute the desalinated water throughout the region. The project is scheduled to be online by early 2016, though deliveries could begin as soon as fall 2015.

During the three-year construction process, the desalination project is supporting an estimated 2,500 jobs and infusing $350 million into the local economy.

For more information about the Carlsbad Desalination Project, visit the project website at www.carlsbaddesal.com, or the Water Authority’s website, www.sdcwa.org.

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Carlsbad, CA (January 8, 2014) – City leaders, San Diego County Water Authority board officers, IDE Technologies, NRG Energy and Poseidon Water executives visited the Carlsbad Desalination Project today to mark the first anniversary of construction on the Western Hemisphere’s largest seawater desalination plant, which is more than 25 percent complete.

Carlsbad - One year after construction began, the $1 billion Carlsbad desalination plant is under budget and on schedule to begin producing 50 million gallons of drinking water per day when it opens in 2016.

• The Carlsbad financing package marks the successful culmination of a decade of painstaking preparation and tremendous tenacity by Poseidon Resources. It proves beyond all doubt that with the right determination, large-scale desalination infrastructure in the US can be financed – even in California.
• After indicating an average interest rate of 5.60%, propitious market conditions allowed the debt component of the deal to be priced at 4.78% – saving ratepayers an estimated $200 million in debt service costs over the lifetime of the bonds.
• The water resourcing challenges of the arid Southwestern US require innovative financing solutions. The pioneering collaborative approach taken at Carlsbad will serve as a blueprint for the financing of other large-scale desalination projects across the southern US.

Read the full article online at globalwaterawards.com.

March 8, 2013 -

The Carlsbad Desalination Project was honored Thursday in New York as the “North American Water Deal of the Year” for 2012 by Project Finance, an international trade publication that annually highlights major industry accomplishments around the world.

Carlsbad Desalination Project

· Total capital cost: $1.003 billion (includes plant, pipeline, financing costs and Water Authority system modifications)

· Bond interest rate: 4.78 percent

· Developer: Poseidon Resources

· Construction contractors: Kiewit Infrastructure West and J.F. Shea Construction Inc.

· Water deliveries: Expected to begin in 2016

· Production: 48,000 to 56,000 acre-feet/year

The magazine’s March issue said the $734 million bond issue in December “could serve as a useful template” for public-private partnerships in the water industry, particularly for seawater desalination projects.

“The San Diego County Water Authority … was the key to bringing the deal to close,” said Project Finance, which bases its accolades on innovation, deal repeatability, value, problem solving, risk mitigation and other factors. This year, it is holding awards ceremonies in Singapore, Dubai, London and New York.

Project Finance highlighted the Carlsbad project’s Water Purchase Agreement, which allowed the Water Authority to shift appropriate construction and operation risks to developers. The Water Authority only pays for water that is produced according to pre-set quality and quantity standards. The magazine also noted the public nature of the desalination project, which included more than 40 public meetings before the purchase agreement was approved by the Water Authority’s Board of Directors on Nov. 29, 2012.

“This is wonderful recognition of the dedication and cooperation by all parties to work through complex issues and find solutions so that we could proceed with a vital water supply project that will be a cornerstone for meeting our region’s water needs for decades,” said Thomas V. Wornham, Chair of the Water Authority’s Board.

Board approval launched an effort to meet project benchmarks by the end of 2012. Moody’s assigned a Baa3 rating to the desalination project bonds, bolstered by what Project Finance called the Water Authority’s “sterling” credit rating. “Bond funds, insurance companies and investment advisers eagerly bought in,” the magazine said.

On Dec. 13, the project team secured a 4.78 interest rate for the bonds, saving Water Authority ratepayers an estimated $200 million over three decades compared to earlier projections. Financing closed on Dec. 24. Construction is now underway. The project is expected to produce up to 50 million gallons a day of desalinated water starting in 2016.

The Carlsbad Desalination Project includes a seawater desalination plant and a 10-mile, large-diameter pipeline being developed by Poseidon Resources, a private, investor-owned company that develops water and wastewater infrastructure.

The plant is being built on industrially zoned land adjacent to the Encina Power Station in Carlsbad. The pipeline will deliver water from the plant to the Water Authority’s Second Aqueduct in San Marcos. The Water Authority will also make a number of improvements to its pipeline system and the Twin Oaks Valley Water Treatment Plant to integrate desalinated water.

The total cost for desalinated water, including the pipeline, is projected at $2,014 to $2,257 per acre-foot in 2012 dollars. While that’s more costly than current water supplies, desalination is a more reliable, drought-proof supply. Water Authority projections also show seawater desalination it may be cost-competitive with imported water sources by the mid-2020s.

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At the moment, the seawater is being diverted from the ocean to cool an aging natural-gas power plant. But in three years, if all goes as planned, the saltwater pulled in at that entryway will emerge as part of the regional water supply after treatment in what the project’s developers call the newest and largest seawater desalination plant in the Western Hemisphere.

Large-scale ocean desalination, a technology that was part of President John F. Kennedy’s vision of the future half a century ago, has stubbornly remained futuristic in North America, even as sizable plants have been installed in water-poor regions like the Middle East and Singapore.

The industry’s hope is that the $1 billion Carlsbad plant, whose builders broke ground at the end of the year, will show that desalination is not an energy-sucking, environmentally damaging, expensive white elephant, as its critics contend, but a reliable, affordable technology, a basic item on the menu of water sources the country will need.

Proposals for more than a dozen other seawater desalination plants, including at least two as big as Carlsbad — one at Huntington Beach, 60 miles north of here, and one at Camp Pendleton, the Marine Corps base — are pending along shorelines from the San Francisco Bay Area southward. Several of these are clustered on the midcoast around Monterey and Carmel.

The San Diego County Water Authority has agreed to buy at least 48,000 acre-feet of water from the plant each year for about $2,000 an acre-foot. An acre-foot equals about 326,000 gallons, roughly enough for two families of four for a year. The authority has made a long-term bet that those costs — now double those of the most readily available alternative — will eventually be competitive. But it still means the authority will pay more than $3 billion over 30 years for only about 7 percent of the county’s water needs.

As Sandra Kerl, the deputy general manager of the authority, said in a recent interview, “There’s a lot of eyes on this.”

The technology used in the Carlsbad plant, known as reverse osmosis, was developed decades ago. It involves pushing the water through a series of microscopic sieves rolled up into larger cylindrical filters. The energy-intensive process separates pure water from both salt molecules and impurities. The filters, some of which are made locally, are cheaper and more durable than they were a decade ago, industry accounts say, bringing down the overall price of the plant and its operations.

In the Western United States, where the complexities of water law and heavily subsidized federal and state water projects have complicated the economics of water delivery and hamstrung any widespread development of water markets, the Carlsbad plant offers a peek into a future when water prices reflect the actual cost of procurement and delivery. David Moore, a managing director of Clean Energy Capital, financial advisers to the San Diego County authority, said the water authority had “made the call that over time this water is going to be more affordable than other sources. That was the fundamental risk of the transaction.” The price of water the authority now gets from the Metropolitan Water District of Southern California is about $1,000 an acre-foot.

The bet on this technology was not an obvious one; the recent history of desalination in the United States and Australia has been mixed, at best. Some recently constructed Australian plants are flourishing while others stand idle some of the time. In this country, technological missteps, delays and bankruptcies dogged the first big plant, which finally opened in Tampa in 2007.

“Tampa was a buzz kill for the sector,” Mr. Moore said.

So the Carlsbad plant is being watched not just for its performance or its effect on the local marine environment, but for its financial architecture.

Mr. Moore and other financial advisers are trying to make investors and bondholders comfortable with the technology by mimicking the financial approach of a merchant power plant — for instance, substituting a “water purchase agreement” for a “power purchase agreement,” to show that Carlsbad’s water has a guaranteed market.

The water purchase agreement was signed by the San Diego authority and the plant’s developer, Poseidon Resources, of Stamford, Conn., in late November. Poseidon bears the responsibility for completing the plant and operating it; the authority does not pay for any water that is not delivered.

The project’s costs are financed by two bond offerings totaling $734 million and a $189 million equity investment. In addition, the water authority is committing about $80 million to other capital needs. All of these arrangements have interlocking guarantees and risks, with the costs of constructing the plant borne by the project developers and the water authority responsible for constructing a 10-mile pipeline to send the water on its way to San Diego’s taps.

The public water authority did not want its ratepayers to be responsible for paying for water that was never delivered; it will pay only for water that meets its standards and goes into its reservoirs. That said, when the water is flowing in 2016 the county must pay as much as $113 million annually, which could rise over time.

Late last year, this financial picture prompted Fitch Ratings to give the project’s bond issue a BBB- rating, the lowest for investment grade debt. For Fitch executives, familiar with the unexpected obstacles in deployment of desalination technology, the water purchase agreement was a critical factor leading to a rating above junk level.

The cost comparison remains ugly for desalination right now, but the water agency has calculated that, given the history of annual rate increases from the Metropolitan Water District of Southern California, the desalinated water could be cheaper than the current supply by 2024.

Then there is the question of reliability. Water supplied by the Southern California water district comes from Northern California transfers and Colorado River diversions. Climate change is likely to cut into both sources over time. And San Diego and the Southern California district have a history of antagonism; the Carlsbad plant, which would supply as much as 7 percent of the region’s needs, is the most recent of several San Diego efforts at diversification.

But water policy experts and local environmental activists are skeptical about the value of desalination compared with conservation and reuse. They will be watching the plant from a very different perspective.

Heather Cooley, a senior research associate with the Pacific Research Institute, an Oakland-based nonprofit group specializing in water supply questions, said that even if the Carlsbad plant worked well, a new rush to desalination was hardly certain.

It depended, she said, on whether “water demand continues to grow, as was likely in the past, or whether, as we’ve seen in the past 15 years, it stays the same or even declines, based on efficiencies and conservation and the structure of the economy.”

She added that by promising to buy at least 48 million gallons a day from the plant, the county water authority has less incentive to step up its push for water conservation, or to invest further in water reuse.

The environmental group the Surfrider Foundation, which has fought the Carlsbad plant at every turn, expects the plant to be an object lesson in how not to guard against water shortages. Among other things, the foundation emphasizes the energy needs of the plant, which will consume 5,000 kilowatt-hours of electricity to produce an acre-foot of water.

As electricity costs go up over time, the county’s water bill — already estimated to be $5 to $7 a month higher for each customer by 2016, thanks to Carlsbad — will rise in tandem.

But authority officials noted that water delivered from the Southern California district also required energy, and its cost, too, would go up in such circumstances.

The costs have been one focus of opponents.

“If the county had taken a holistic, practical approach to water management and water supply needs, it would never have done something so costly,” said Belinda Smith, a member of Surfrider.

She and her colleagues see the surface water intake valve as the plant’s Achilles’ heel. The current state permit covering the intake’s operations expires when the Encina natural gas power plant is no longer using cooling water. If the new permit required expensive changes — if, for instance, the entire intake had to be moved below the surface — the cost to ratepayers, and particularly to Poseidon, could increase significantly.

The county and the developers said this eventuality was covered in the financial planning.

But for the moment, Poseidon officials are energized by the prospect of beginning construction, after a decade of delays. Peter M. MacLaggan, a senior vice president at Poseidon, referred to the experience of the company’s desalination technology partners when he said, “We’re at desal 3.0 or 4.0 here at Carlsbad.”

He added that the need for new water supplies could provide a ready market for the technology, if it is effective. “Water in California has been cheap and plentiful. And that’s no longer the case,” he said. In San Diego, he said, “We’re facing it. The rest of California is facing it to different degrees. We’re all challenged in finding new water supplies.”

After a decade of struggles to assuage environmentalists, raise almost $1 billion and win permits, Poseidon Resources Group will finally answer a critical question: Is converting seawater to drinking water a profitable venture in the U.S. when there are cheaper options? The developer of water infrastructure projects began site work last month on the Carlsbad desalination plant, the largest of its kind in the Western Hemisphere. When completed in 2016, the facility 33 miles (53 kilometers) north of San Diego each day will create 54 million gallons of drinking water after drawing it from the salty Pacific Ocean. Bankrolled by a $922 million JPMorgan Chase & Co.-led public-private bond offering -- the biggest U.S. project financing deal of 2012 -- Carlsbad’s chances of success are aided by a 30-year agreement with San Diego’s water authority to buy water from the plant. If successful, the project may become a model for how to ease a growing water crunch.Read the full article at ​bloomberg.com.

Concurrent with the financial closing, Poseidon has given the notice to proceed to the joint-venture company that will design, construct and start up operations at the plant, as well as construct a 10-mile pipeline that will deliver the approximately 50 million gallons per day of treated water produced by the plant into San Diego County's water system.

Done in partnership with the San Diego County Water Authority, the project financing is one of the largest project-specific financings for new water assets in the United States.

Poseidon and the Water Authority brought together numerous qualified parties that worked collaboratively to drive the project to this historic moment. The project-specific structured deal assigns responsibility and accountability to the appropriate parties, which protects San Diego ratepayers while mitigating the risk to investors.

"I'd like to acknowledge the San Diego County Water Authority for its leadership and diligence throughout this enormously successful financing process," said Poseidon Resources CEO Carlos Riva. "I am grateful for the skill and support of Water Authority General Manger Maureen Stapleton and her staff, who brought this complex financing together on a compressed timeline. I also would like to thank our site host NRG for the important role it played in allowing this project to move forward."

Kiewit Shea Desalination, a joint venture between subsidiaries of Kiewit Corp. and J.F. Shea Construction Inc., will provide engineering, procurement and construction (EPC) services for the desalination plant and the pipeline under a fixed-price contract. IDE Americas Inc., a subsidiary of IDE Technologies LTD, will design the seawater process plant under the direction of Kiewit Shea Desalination. IDE will also be responsible for the operation and maintenance (O&M) under a 30-year contract.

The signing of the EPC and O&M contracts coincided with the close of the sale of $734 million in tax-exempt bonds issued by the California Pollution Control Financing Authority on behalf of Poseidon and the Water Authority, with underwriting led by JP Morgan. Private equity investor Stonepeak Infrastructure Partners provided the remainder of the project capital.

Under the terms of the Water Purchase Agreement between Poseidon and the San Diego County Water Authority, the agency pays only for delivered product that meets its stringent quality standards. This ensures Poseidon has significant incentive to avoid construction delays, plant downtime, labor disputes and inefficiencies -- costs that Poseidon would absorb if incurred.

In turn, Poseidon sought to minimize these risks by selecting highly qualified firms with vast experience in large-scale infrastructure and desalination projects, history of success and sufficient resources to support accountability measures in their contracts.

• Kiewit Corp. has more than 127 years of heavy civil construction experience, which includes building the Olivenhain Dam for the San Diego County Water Authority.
• J.F. Shea Construction Inc. is one of the oldest and most experienced construction and engineering firms in the United States. It was involved in the construction of the Golden Gate Bridge and Hoover Dam, as well as 70,000 feet of pipeline for the San Diego County Water Authority.
• IDE Technologies LTD has designed, built and currently operates some of the world's largest desalination and water-treatment facilities.

"We chose the very best in the business to ensure the Carlsbad Desalination Project delivers on its promise of a reliable local supply of water to the San Diego region," said Riva. "The high level of accountability built into every aspect of this project will make it a model for effective public-private partnerships."

Construction is set to start immediately, with commercial operations commencing in 2016. The project will create 2,300 jobs during construction and will support more than 575 jobs for the life of its operations.

"Surfrider Foundation (Surfrider) appeals from the trial court's denial of its petition for a writ of mandamus challenging the approval of the National Pollutant Discharge Elimination System (NPDES) permit by the California Regional Water Quality Control Board, San Diego Region (the Regional Board) for a desalination facility that Poseidon Resources (Channelside), LLC (Poseidon) plans to build on the coast in Carlsbad, California.

Surfrider contends that in issuing the NPDES permit the Regional Board failed to comply with the requirements of Water Code section 13142.5, subdivision (b) (section 13142.5(b)),1 which provides that "[f]or each new or expanded coastal powerplant or other industrial installation using seawater for cooling, heating, or industrial processing, the best available site, design, technology, and mitigation measures feasible shall be used to minimize the intake and mortality of all forms of marine life." (Ibid.) We reject Surfrider's arguments and conclude that the Regional Board complied with section 13142.5(b). Accordingly, we affirm the judgment."

Download the full ruling.

The California Pollution Control Financing Authority (CPCFA) today unanimously approved the issuance of up to $840 million in bonds to finance the Carlsbad Desalination Project.

The approval allows the project to proceed with the sale of tax-exempt private-activity and municipal-purpose bonds to fund the construction of the desalination plant, auxiliary water-delivery-system infrastructure and environmental mitigation projects. CPCFA administers and allocates the state’s annual allotment of federal tax-exempt private-activity bonds for the financing of private development projects that benefit the public.
Poseidon expects the bond sale to take place in mid-December, with construction to commence shortly thereafter.

Also on Friday, the 4th District Court of Appeal ruled in favor of the project in the appeal by the Surfrider Foundation of the California Superior Court decision upholding the project approval by San Diego Regional Water Quality Control Board, establishing the conditions under which Poseidon is able to withdraw seawater from the Pacific Ocean.

In the original lawsuit challenging the RWQCB’s project approval, the Surfrider Foundation alleged the project did not comply with California Water Code Section 13142.5(b), which requires new industrial facilities using seawater for processing to use the best available site, design, technology and mitigation measures feasible to avoid the intake and mortality of marine life.

Poseidon Water prevailed in that lawsuit in 2011, with Judge Judith Hayes finding that the RWQCB properly applied state law in its approval. Surfrider then appealed the ruling, contending that in issuing the permit the Regional Board failed to comply with the requirements of the California Water Code.

In its decision, the Court of Appeal rejected Surfrider’s arguments and concluded that the Regional Board complied with the California Water Code. The decision is Certified for Publication, marking its legal significance.

The decision ends the 14th and final remaining legal challenge to the project.

The San Diego County Water Authority Board of Directors has approved the purchase of the water produced by the proposed Carlsbad Desalination Project, a seawater desalination plant that will produce enough water to meet about 7 percent of the region's water needs in 2020, reducing San Diego's dependence on imported water and significantly improving water reliability in the region.

The agreement clears the way for the sale of bonds to finance the fully permitted project, which includes the plant as well as a 10-mile pipeline to deliver the treated water to customers. The bond financing is expected to proceed next month, and construction will begin early next year on the facility, which is located next to the Encinas Power Station in Carlsbad, Calif. The plant is expected to be in operation in 2016.

Under the 30-year agreement approved today, the CWA will purchase the plant's output of approximately 50 million gallons per day of drinking water, which is enough to serve nearly 450,000 county residents.

"San Diego has reached a major milestone in its long-term plan to develop drought-proof, local sources of water to sustain our economy and quality of life, and Poseidon is proud to be part of it through this partnership with the County Water Authority and its 24 member agencies," said Carlos Riva, chief executive officer for Poseidon Resources. "The Carlsbad Desalination Project has been more than a deade in the making, and we're grateful to the many supporters who helped shape the project and move it forward so we can deliver this much-needed supply to San Diegans."

The project and the Water Purchase Agreement enjoys broad support from elected leaders, including the region's entire Congressional and state Legislative delegation, as well as mayors and councilmembers throughout the county. It also won the support of respected business and trade groups such as the San Diego Regional Chamber of Commerce, Biocom, the San Diego County Taxpayers Association, the San Diego and Imperial Counties Labor Council, the San Diego Building Trades & Construction Council and groups representing agricultural interests.

Construction of the plant will create about 2,300 jobs in the region, with ongoing operations supporting about 575 jobs. In addition to creating jobs, the project will help protect the region's economy from the devastating impact of water shortages.

Adding to the project's benefits is Poseidon's restoration of 66 acres of wetland habitat in San Diego Bay, which will return the bay to the original condition before it was altered for farming and industrial use. The project will restore natural tidal flows and encourage the return of native plants, migratory birds and aquatic life.

Poseidon Resources specializes in developing and financing water infrastructure projects primarily seawater desalination and water treatment plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks.

The San Diego County Water Authority board on Thursday will consider a 30-year contract to buy the water from Poseidon Resources LLC, which needs the deal to move ahead with plans to sell bonds that would pay for more than 80 percent of $984 million project. The plant in Carlsbad would produce 50 million gallons of highly purified drinking water a day, enough to supply about 8 percent of the region in 2020." By ELLIOT SPAGAT Associated Press. Read the full AP article.

The organization determined the comprehensive contract between the County Water Authority (CWA) and the project developer, Poseidon Resources, provides considerable protections for ratepayers, minimizing the risk to ratepayers of nonperformance and construction cost overruns.

“Our support is in part based on the numerous ratepayer protections built into the agreement, which ensure that major risks are on the project’s developer and not on the public,” said Lani Lutar, President and CEO of the Taxpayers Association. Download the full article.

In November 2011, the Water Authority and Poseidon began direct negotiations on the draft WPA, and Poseidon is now reviewing a second draft of the agreement. The parties plan to have their next negotiating session in mid-February. At least two public workshops, which could take place in May and June, will be part of the review process, and the WPA could be presented to the board for consideration at its June or July board meetings.

The Water Authority staff and consultants are also conducting a due diligence review of financial and other project documents as part of the project’s bond rating process, including the following agreements between Poseidon and its contractors:

• An agreement between Poseidon and a Kiewit Infrastructure–JF Shea Construction joint venture to construct the facility and conveyance pipeline,
• An agreement between the joint venture and IDE Technologies to design the desal plant, and,
• An agreement between Poseidon and IDE to operate the plant.

At last week’s meeting, the Board also agreed to approve consultant contract amendments and to increase its current budget from $2 million to $4.8 million to reflect the current WPA negotiations.

The project’s current cost of water is estimated at $1,865/AF ($1.51/m3; $5.72/kgal) and its capital cost is estimated at $780 million.

If the Water Authority approves the WPA this summer, desalted water from the Carlsbad project should be available by 2016 – 18 years after Poseidon began to develop the project – and will comprise seven percent of the total regional supply.

Of the big four, water is hands down the most vital. If deprived of water, human beings will be on the fast track to the river Styx within three days, which alone is sufficient to make water the most vital urban service.

Moreover, without water, a city’s sewage service will collapse and its ability to fight fires will be degraded to close to zero. When it comes to vital urban services, water is first among equals.

That being the case, one would suppose that just about the last thing a city would like to see located in a foreign country is its water supply, especially if the government of that country was showing signs of losing control of parts of it to armed gangs and private militias.

But four water utilities that supply San Diego, Phoenix, Las Vegas and southern California are seriously thinking about building a major water desalination plant in Mexico instead of the United States.

The utilities commissioned a study of the feasibility of building a 50-million-gallon-a-day (300 acre feet) desalination plant, which could supply enough water for 100,000 people, in Mexico at Rosarito, south of San Diego. The study found no show-stoppers, and the utilities have commissioned a second study, which will include costs. Negotiations with the Mexican government are also under way. What’s more, a private company is considering building a 100-million-gallon-a-day plant in the same area and selling its output to the gringos.

Why would American utilities even consider such a course, let alone pursue it? Why, indeed.

About 10 years ago a company called Poseidon Resources set out to build a 50-million-gallon-a-day desalination plant at Carlsbad, Calif., near San Diego. A decade of studies, hearings and litigation ensued before the company finally won approval from the California state regulators. There may well be further challenges.

The project’s main nemesis has been an organization named the Surfrider Foundation, an environmental group founded by Malibu surfers in 1984 that focuses on protecting beaches and marine water quality. Today it has 50,000 members and 80 chapters worldwide. In addition to the Carlsbad project, it opposes proposed desalination plants in Huntington Beach and Monterey.

The Surfrider Foundation’s main objection to the projects is that their intake pipes can suck in fish eggs and that they discharge concentrated salt brines that can also damage marine life into the ocean. The foundation also objects to the high-energy demands of desalination processes, presumably because the energy would come from burning fossil fuels.

All three objections seem pretty weak. The brine and fish egg problems do not seem beyond the ability of civil and process engineering to fashion solutions. As for the energy issue — use wind, solar or nuclear. Of course, that might require the California greens who are fighting wind and solar power plants in the Mojave Desert and the power lines to connect them to the grid to lighten up.

Shortly after he became energy secretary, Nobel laureate Steven Chu gave an interview in which he pointed to climate models that predicted global warming could result in the Sierra Nevada mountains, the source of most of California’s water, losing 90 percent of their snowpack by the end of the century. If Chu is right, the state of California would be looking at an annual water shortfall amounting to 35 million or 40 million acre feet at a minimum.

(By way of comparison, California’s annual water consumption is around 70 million acre feet. Its draw from the Colorado River comes to six or seven million acre feet.)

It took California a hundred years to put in place its current water infrastructure. Assuming Chu is right, it needs to start building the successor system now, and central to the successor system is a massive commitment to desalination and waste-water recycling (which to a large extent will use desalination technology).

Viewed from this perspective, the Surfrider Foundation is being irresponsible, or perhaps more charitably, self-absorbed beyond words.

Which raises a couple of questions:

1) Are environmental organizations like the Surfrider Foundation capable of distinguishing between what is important and what isn’t? Hint: Ensuring an adequate water supply for 38 million people in the face of impending climate change is more important than the welfare of a few square miles of fish eggs, just as the commercialization of solar and wind energy is more important than a few square miles of desert tortoise habitat.

2) If the country has so hamstrung itself with regulatory process and tolerance for greens gaming the system that public agencies responsible for the water supply think that contending with the Zetas in Mexico is a more attractive option than contending with the Surfrider Foundation in California, are we facing an environmental crisis of existential proportions — or a governance crisis of existential proportions?

“Poseidon Resources is pleased to donate these legal costs to a worthy organization like the Agua Hedionda Lagoon Foundation. The Foundation is an established and respected coastal organization with a track record of real, tangible environmental stewardship,” said Scott Maloni, Vice President of Poseidon Resources. “The donation is our way of ensuring that these misguided lawsuits produce something positive for the coastal environment,” said Maloni.

“Poseidon Resources has demonstrated time and again its commitment to preserving and protecting the Agua Hedionda Lagoon,” said Lisa Cannon-Rodman, Executive Director of the Agua Hedionda Lagoon Foundation. “We have a longstanding relationship with Poseidon Resources because we share a common interest in maintaining a healthy watershed and lagoon ecosystem. The Agua Hedionda Lagoon is an environmental and recreational treasure, and it will soon be the source of drinking water for three million San Diego County residents. We are very appreciative of Poseidon’s continued support of the Foundation’s efforts to protect this precious natural resource.”

The $3,932.64 donation comes from the Surfrider Foundation’s repayment of its share of the court costs stemming from litigation it brought against the project in conjunction with San Diego Coastkeeper. Court costs were required to be reimbursed by the litigants because all lawsuits filed against the project -and dismissed- were determined by the courts to be without merit.

In total, Coastkeeper and Surfrider have been responsible for 14 legal challenges (nine lawsuits and an additional five administrative permit appeals) to permits issued to the desalination project. Thirteen of the legal challenges have been dismissed. The fourteenth challenge – a Surfrider Foundation lawsuit appealing the California Superior Court’s June 2011 decision to uphold a permit condition approved by San Diego Regional Water Quality Control Board – is pending but has no bearing on the project’s underlying Regional Board permit and no effect on the project’s financing and construction schedule.

In addition to providing San Diego County with 50 million gallons per day of drought-proof, high quality drinking water, the Carlsbad Desalination Project will have a tremendous impact on the regional economy. Once full-scale construction begins, the project will support over 2,400 jobs and contribute an estimated $350 million in local spending during construction and $50 million in annual spending throughout the region once the desalination plant operations begin in 2014. Poseidon is currently finalizing a water purchase agreement with the San Diego County Water Authority that covers the plant’s full 56,000 acre feet/year capacity. County Water Authority Board approval of the water purchase agreement will clear the way for the start of the next phase of project construction.

Poseidon Resources specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks. For more information on Poseidon Resources and the Carlsbad desalination plant visit our website at www.carlsbad-desal.com.

“The Carlsbad project is the largest shovel-ready water infrastructure project in the state of California. It will create over 2,000 skilled jobs and generate over $350 million in economic activity during the 36-month construction phase. Once operations begin, the project will support 400 permanent jobs and contribute over $50 million annually to the regional economy.

“We look forward to working with the County Water Authority to finalize a water purchase agreement so that we can start construction on this new locally-controlled, drought-proof water supply for San Diego County.”

Riva has had a distinguished career as President or Chief Executive Officer of a number of major infrastructure companies, including J. Makowski Company, Intergen, Amec Group, Ltd, and most recently as CEO of Verenium Corporation, a San Diego-based pioneer in the fields of advanced biofuels and industrial enzymes. He holds engineering degrees from M.I.T. and Stanford University and an MBA from Harvard Business School.

Riva joins Poseidon at a time when it is poised for rapid growth after several years of active development of a number of seawater desalination projects. The fifty-million gallon per day Carlsbad, CA project (the first large-scale seawater desalination project permitted in California) is set to close project financing later this year. Another fifty-million gallon per day project in Huntington Beach, CA is in the final permitting stage and is expected to reach financial close in 2012. The company’s development pipeline includes additional seawater desalination projects in California, Texas and Florida.

“I am very pleased to be joining the Poseidon Resources team at such a pivotal time,” said Riva. “The company has done a remarkable job bringing forward these large infrastructure projects in a very challenging regulatory environment and is now poised for significant growth. Poseidon has built important strategic relationships with public agencies and world-class engineering contractors that will be important to our success as we move ahead with our development and construction program. This is a very exciting time for me professionally, and for the shareholders and partners of Poseidon,” said Riva.

Poseidon Resources specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks. For more information on Poseidon Resources and the company’s projects, visit www.poseidonresources.com.

Between 2006 and 2009, thirteen legal challenges – eight lawsuits and five permit appeals – were filed against the Project primarily by the San Diego Chapters of Surfrider Foundation and Coastkeeper (see attached litigation chronology). Superior Court Judge Judith Hayes’ ruling resolves the last outstanding legal challenge against the Project.

“We appreciate the Court’s thoughtful consideration of the record built by the Project over the past decade,” said Poseidon Resources’ Senior Vice President Peter MacLaggan. “The ruling is definitive and is the latest independent determination that the Project complies with all applicable state and federal environmental laws,” said MacLaggan.

In the lawsuit, the Surfrider Foundation alleged that the Project did not comply with California Water Code Section 13142.5(b), which requires new industrial facilities using seawater for processing to use the best available site, design, technology and mitigation measures feasible to avoid the intake and mortality of marine life.

In issuing her judgment, Judge Hayes ruled that the San Diego Regional Water Quality Control Board properly applied state law, and that “Water Code Section 13142.5(b) does not prohibit the implementation of restorative mitigation measures when considering a project’s best available, site, design, technology and mitigation measures feasible.” Judge Hayes’ ruling went on to say, “The plain language of the Section 13142.5(b) provides that mitigation measures, together with the best available site, design and technology will be used for each new coastal industrial plant.” Judge Hayes also ruled that the Federal Clean Water Act Section 316(b) does not apply to desalination plants as originally asserted by Surfrider.

The Project underwent approximately 20 public hearings with over 80 hours of public testimony and deliberation over a seven year permitting period that started in 2003. Each and every one of the state’s environmental permitting and regulatory agencies that reviewed the Project approved it.

“The across-the-board approval of the Project by California’s environmental regulators including the Coastal Commission, San Diego Regional Water Quality Control Board and State Lands Commission is a clear indication that the Carlsbad Desalination Project is fully protective of the environment,” continued MacLaggan. “While the opponents’ litigation strategy was unfortunate, we now have a robust legal record to guide the future permitting of desalination projects in California, “said MacLaggan.
Phase I Project construction was initiated in November 2009 and Phase II will commence after Project financing is completed later this year.

Poseidon Resources specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks. For more information on Poseidon Resources and the Carlsbad desalination plant visit our website at www.carlsbad-desal.com.

Poseidon’s proposed 66-acre restoration site is located in the South San Diego Bay Unit of the San Diego National Wildlife Refuge and is part of an ongoing restoration effort by the United States Fish and Wildlife Service (USFWS). The wetlands restoration site is managed and owned or leased by the USFWS exclusively for restoration of coastal wetlands and associated uplands. Poseidon and the USFWS are entering into a partnership to facilitate the restoration and enhancement of wetlands. The Commission’s approval of the wetlands restoration site clears the way for Poseidon and the USFWS to prepare environmental studies and a final project design.

“Poseidon is grateful to the Coastal Commission for its unanimous support,” said Poseidon vice president and project manager Stan Williams. “Poseidon has extensively studied the feasibility of the site in the San Diego National Wildlife Refuge and the Commission’s decision to provide for wetlands restoration within the Refuge will provide measurable environmental benefits. We look forward to working with the community on the final restoration project design,” said Williams.

Poseidon’s proposed site was endorsed by the Commission staff and widely supported by federal and state resource agencies and environmental organizations and local elected officials including: the California Coastal Conservancy, California Department of Fish & Game, San Diego Regional Water Quality Control Board staff, Environmental Health Coalition, Audubon Society, Agua Hedionda Lagoon Foundation, WiLDCOAST, Friends of the San Diego Wildlife Refuges, San Diego County Supervisor Greg Cox, Chula Vista Mayor Cheryl Cox, National City Mayor Ron Morrison, San Diego Mayor Jerry Sanders, Imperial Beach Mayor Jim Janney, State Senator Juan Vargas, State Assemblyman Ben Hueso and San Diego City Councilman David Alvarez.

In 2007, the Coastal Commission approved a Coastal Development Permit (CDP) for Poseidon’s Carlsbad Desalination Project. The approved CDP included a condition that Poseidon prepare a Marine Life Mitigation Plan (MLMP) to address potential impingement and entrainment impacts to marine life that might occur during the lifetime of the desalination plant. The Coastal Commission approved the MLMP in August 2008 and required Poseidon to research and propose a site for the wetlands restoration.

A mitigation milestone may come Wednesday when the California Coastal Commission meets in the Chula Vista City Council chambers. Commission staff, supported by a long list of regulatory and environmental groups, recommends approval of Poseidon’s preliminary plan to convert 66 acres of commercial salt ponds in south San Diego Bay into wildlife refuge.

Restoration of the wetlands to their natural state would be a wondrous development for the wildlife and fish near the tip of San Diego Bay and for the people of South County, especially with the South Bay Power Plant coming down.

The Otay River floodplain site is 40 miles from Agua Hedionda Lagoon, the desalination plant’s future location. Some in North County may ask why not restore a lagoon closer to home. Put Esther Sanchez in that camp. She’s an Oceanside City Council member and Buena Vista Lagoon is certainly near and dear to her. As a member of the Coastal Commission, however, Sanchez surely understands that her own commission has set parameters on the required mitigation. It must be for a minimum of 66.4 acres covering no more than two sites, be able to be finished in a time certain and so on.

Lump six North County lagoons together and only 51 acres of the required type of mitigation could be accomplished. Read the requirements carefully and three – Buena Vista, San Elijo and Agua Hedionda – do not qualify. Just one site in the entire region, the Otay River floodplain, meets all criterion.

But North County will have other chances. Recent improvements in San Dieguito Lagoon near the Del Mar Fairgrounds were mitigation for the San Onofre Nuclear Plant. Interstate 5 widening will carry heavy mitigation requirements.

The Poseidon plant already has been approved – in November 2007, actually. An endless series of harassment lawsuits no longer has the ability to stall. Poseidon is finalizing a water supply and tax payment agreement with the Carlsbad Municipal Water District and plans to seek financing soon. This should be the year of actual construction. Delaying approval of the mitigation plan would only delay wetlands restoration itself.

California has precious few wetlands left, offering migratory and permanent homes to thousands of species of birds, fish and mammals. This is an opportunity to reclaim at private expense 66 of those lost acres, at a site next to an existing wildlife refuge. What could be more compatible with the Coastal Commission’s central mission of protecting our coastline?

This should be an easy vote for commissioners. Approve the mitigation now.

Over a seven year permitting period from 2003-2009, the project underwent approximately 20 public hearings and over 80 hours of public testimony and deliberation. In response to the approval of the Project by the state’s environmental permitting and regulatory agencies, a handful of seawater desalination opponents have unsuccessfully filed a dozen permit appeals, revocation requests and lawsuits in an attempt to delay the desalination project.

In August 2008, the California State Lands Commission unanimously authorized a lease agreement that allowed for operation of the Project using the Encina Power Station’s seawater intake and outfall facilities. The San Diego chapters of the Surfrider Foundation and Coastkeeper appealed the decision to the California Superior Court. In August 2009, the Superior Court dismissed the lawsuit, leading Project opponents to file an appeal.

"We appreciate the Court’s thoughtful consideration of the record and ruling upholding the Superior Court’s 2009 decision,” said Poseidon Resources’ Senior Vice President Peter MacLaggan. “The ruling is definitive and is the latest in a series of independent determinations that the Project complies with state environmental law,” said MacLaggan.

The litigants unsuccessfully argued that as a responsible agency under the California Environmental Quality Act (CEQA), the State Lands Commission should have required additional environmental studies. The Court of Appeal found no merit in the petitioner’s arguments and denied the petition on all grounds.

Poseidon Resources specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks.

San Diego – Poseidon Resources today announced the San Diego County Water Authority (SDCWA) Board of Directors voted unanimously to direct its staff to work with Poseidon on a contract to purchase drinking water from Poseidon’s Carlsbad Desalination Project (“Project”). The Project’s capacity is 56,000 acre feet per year, enough drinking water for 300,000 San Diego County residents.

Poseidon currently has executed water purchase agreements with nine San Diego County retail water agencies collectively known as the San Diego Desal Partners. Each of the San Diego Desal Partners is a local water retailer and member agency of the SDCWA. The San Diego Desal Partners will relinquish their rights to the Project output if Poseidon and the SDCWA are able to reach an agreement.

“Today’s action by the San Diego County Water Authority demonstrates the critical importance of the Carlsbad Desalination Project to the region’s water supply reliability,” said Poseidon Resources Senior Vice President Peter MacLaggan. “The direct involvement of the Water Authority ensures that the water supply benefits associated with the Project will be shared throughout the region,” said MacLaggan.

The Carlsbad Desalination Plant is fully permitted and Poseidon started phase one construction on the facility in November 2009. “The leadership from the San Diego Desal Partners was instrumental in achieving these milestones,” continued MacLaggan. “Poseidon is grateful to the San Diego Desal Partners and the Water Authority for their support and continued cooperation as we work together to complete this critically needed water supply project as quickly as possible,” said MacLaggan.

Poseidon Resources specializes in developing, financing, owning and operating water infrastructure projects, primarily seawater desalination plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks. For more information on Poseidon Resources and the Carlsbad desalination plant visit our website at www.carlsbad-desal.com.

The State Water Resources Control Board has three times dismissed appeals from the Surfrider Foundation to deny a permit for the Poseidon Resources desalination plant. Surfrider's latest lawsuit was filed against the San Diego Regional Water Quality Control Board.

The California Coastal Commission has already approved the project and preliminary construction on the proposed plant has begun. Whether or not desal is the best solution to the region's water woes, it's time for Surfrider to find another battle to fight.

Could this be the answer to California's water crisis? Could ocean water desalination end the fight over water rights to the Colorado River, eliminate the need for new canals and pipelines to bring water to Southern California and even allow for the return of stretches of biologically damaged parts of the Sacramento River delta to healthy wetlands?

The Golden State is in desperate need of solutions--it has the unfortunate distinction of holding four spots on Forbes' list of the Top 10 Thirstiest Cities, the American cities most likely to face dire water shortages in the next decade. Among these cities (of 750,000 population or more), the greater Los Angeles metroplex takes first place, followed by San Diego. Bakersfield comes in fifth, while Sacramento, despite being on a river, ranks eighth.

Our list was compiled with the help of Bert Sperling, who created his Sperling Drought Index by combining a variety of data and indices from the National Climatic Data Center. The rankings are based on long-term indicators like aquifer levels, precipitation patterns and historic balance of supply and demand.
As you'd expect, parched places like San Antonio, Phoenix, Las Vegas and Tuscon are also on the list. More surprising: Honolulu, where recent rainfall has been far short of historic norms, and Portland, Ore., where development means water needs have outstripped supply--even in the wettest region of the U.S.

But no state in the U.S. faces problems as big as California's. Even with the crush of snowfall the Sierra-Nevadas got this winter, enough to fill many of California's reservoirs to healthy levels, the states water woes are only getting worse.

California's Department of Water Resources says it would like ocean water desalination to add 500,000 acre feet a year of water to the Golden State's supplies, a modest amount compared with California's overall water consumption. Given 326,000 gallons in 1 acre foot, that would mean building roughly 10 plants the size of Poseidon's.

It sounds great in theory: using human ingenuity to make fresh water for the most parched state from the world's biggest ocean. Poseidon is working on permits to build a second plant up the coast in Huntington Beach; the military is considering a giant one at the Camp Pendleton Marine base. It could rival in size the world's largest, in Jubail, Saudi Arabia, which processes 200 million gallons a day. More than a dozen other plants have been proposed for California.

Disputes with environmentalists have slowed the first one. Poseidon has had to wade through legal appeals from groups concerned about intake pipes sucking in fish, and outflow pipes raising marine temperatures and salinity levels. Poseidon has gotten around that by promising to protect 55 acres of wetlands nearby, and will buy carbon offsets to balance out the emissions from the electricity it will use.

To avoid drawing more water than necessary out of the ocean, Poseidon is building adjacent to NRG Energy's ( NRG - news - people ) Encino, Calif., power generation plant, which currently sucks in ocean water to use for cooling, then pipes it back to the ocean. Poseidon will use the water when the power plant is done with it. For every two gallons of water the plant takes in, its reverse osmosis process will make one gallon of fresh water and send back to the ocean one gallon with twice the salinity level. Poseidon is still wrangling with environmentalists over a desalination plant it wants to build in Huntington Beach adjacent to a power plant owned by AES ( AES - news - people ).

Environmental issues aside, the biggest challenge for Poseidon, and desalination in general, is cost. Scott Maloni, a vice president with Poseidon, explains that it costs $1,100 to desalinate 1 acre foot of water. A third of that is the electricity to run the plant. Then there's another $400 per acre foot to transport the water by pipe into San Diego's water system. Compare that all-in cost of $1,500 to the roughly $900 per acre foot it costs San Diego's water districts to top off its marginal water needs with piped-in imports.

To convince nine nearby water districts to sign 30-year contracts to take Poseidon's water, Maloni had to promise to never charge them more than the going price of imported water. This is not a path to profits, at least in the short run. But Maloni is convinced that within a decade those import costs will rise to meet and exceed Poseidon's production costs. This assumes population growth continues its pace, that people keep flushing toilets and filling pools, and that California rainfall doesn't rise much above its average of 24 inches per year.
To survive financially while waiting for those cost lines to cross, Poseidon has raised more cash than the $350 million needed to build the desalination plant. It has sold $530 million in bonds, and plans an equity offering of $120 million. That will cover $110 million in interest payments. The Connecticut-based company was founded by former executives at General Electric ( GE - news - people ). It built the nation's current largest desalination plant in Tampa Bay, Fla., and has done a host of water projects in Mexico.

Poseidon will probably make out well on this investment, but the risk associated with putting so much capital into a business that is not yet commercially viable means we won't see a building boom of desalination plants in California anytime soon.

Furthermore, even 20 desalination plants would only add a cup to California's water bucket. Though 500,000 acre feet might sound like a lot, California uses 80 million acre feet a year. Just 9 million of that goes to cities for people to use. Another 31 million is used to irrigate crops, and 39 million more flows through rivers and streams, keeping the fish and frogs wet.

So what to do? California's water bureaucrats figure homeowners could save 3 million acre feet a year by being smarter about home water use. Really? That's roughly one-third of urban water use, a fairly ambitious goal. Despite advances in efficient toilets and faucets, residential water use in the state remains where it was in 1972, at 220 gallons per person per day.

Nonetheless, cities can do a lot more with what they have, says Patricia Gober, professor of environmental studies at Arizona State University. In Phoenix (ranked sixth on the list), 70% of residential water is used for outdoor purposes, and an economist in Gober's research group has determined that people are willing to pay $200 more per month to live in a subdivision with lots of irrigated landscaping. For the same money, you can do some first-rate xeriscape landscaping that uses drought-tolerant plants and needs no additional irrigation.
Gober says it's unlikely that any new large dams will be built in the West, "thus any new sources of water for cities of the West will come from current agricultural uses." She says some 80% of the water in the Colorado River basin is now used for agriculture.

That seems like a lot, until you consider that California produces half of the country's fruits, vegetables and nuts and 90% of the wine (550 million gallons a year). Still, to maintain water supplies for city slickers, farmers have seen their allocations slashed, and have even been selling their water to cities. In 2003 San Diego bought rights to 200,000 acre feet a year from farms in the Imperial Valley.

"If you think about it," says drought indexer Gary Sperling, "with every truckload of watermelons or tomatoes that farmers ship, it's like California is exporting water to the rest of the country."

However, Poseidon also said it had to get a two-month extension on state authorization to sell $530 million in tax-free bonds, because it was still completing the final terms of its 30-year contracts with local water agencies. The previous deadline was April 27, said Peter MacLaggan, a Poseidon senior vice president.

Meanwhile, the water agencies say they're still fairly confident the plant will be built.

"I don't think it's the end of the world," said Kimberly A. Thorner, general manager of Olivenhain Municipal Water District, one of the contracting water agencies. "Obviously, we need the water sooner rather than later, but I'm still hopeful that everything is moving forward."

Olivenhain and eight other local agencies and cities have signed binding agreements to buy the water, once it becomes available. However, some items have yet to nailed down for a final contract, such as a guarantee of a price subsidy, MacLaggan said. This isn't expected to be troublesome, he said, but buyers of the tax-free bonds want to see all the details in writing before plunking down their $530 million.

Metropolitan Water District, Southern California's water wholesaler, has offered a subsidy of up to $250 per acre-foot to bring the desalinated water's cost to the agencies down to that of traditional water sources. An acre-foot is about 326,000 gallons, or about what two families of four use in a year.

Yet Metropolitan's approval was hedged ---- if the subsidy is challenged by a member agency, it may be canceled. One of Metropolitan's member agencies is the San Diego County Water Authority, the county's main water importer.

The water authority is also a party to the Poseidon deal. So if the authority changed its mind and opposed the subsidy, that could conceivably invalidate it.
Poseidon is asking for a backstop guarantee from the water authority to make sure the subsidy is available, MacLaggan said.

Investment grade

The bonds' tax-free status was granted in January by the California Debt Allocation Committee, or CDLAC (pronounced "SEED-lack"). The committee grants tax exemptions for projects deemed to be to the state's benefit. In this case, the benefit would be a new and reliable supply of water for drought-vulnerable San Diego County.

The committee reauthorized the tax-free bonds at a March 24 meeting, giving Poseidon until late June to complete the sale, MacLaggan said. Because they're tax-free, the bonds can be sold at a lower interest rate to investors than taxable bonds, lowering the cost of the project and hence the cost to agencies buying the water.
Standard & Poors has rated the bonds at BBB-, the lowest level of investment grade status. Investment grade bonds are considered to be safer, even for unsophisticated buyers. Investors consider investment-grade bonds more reliable than so-called "junk bonds," which are highly speculative and meant for well-informed, risk-tolerant buyers.

A committee staff report stated that Barclay's Capital, Poseidon's financial adviser, said the market for such low investment-grade bonds is strong.

"In its ratings analysis, Standard & Poors evaluated the strength of the project and all of the project counterparties, including equity sponsors, contractors, the operator and all nine of the water districts entering into purchase agreements," the staff report stated. "Through its review of Standard & Poors' analysis (as summarized in its Rating Determination Letter), CDLAC staff believes that their conclusions were sound."
Poseidon had initially considered attempting to get an even higher rating by buying bond insurance, MacLaggan said. However, the cost of the insurance outweighed the benefit, so that idea was scrapped.

Construction delayed

Poseidon began construction in November with its own funds. But that was mainly a formality to ensure its building permit from the California Coastal Commission didn't expire. So far, Poseidon has torn down structures and prepared the land for construction.

The delays were not a surprise, said Greg Blakely, water utilities manager for the city of Oceanside. "It's a novel project," he said.

Now the deal-makers are taking a closer look at the project's revenue sources to make sure they're guaranteed, said Gary Arant, general manager of Valley Center Municipal Water District. He said that scrutiny is to be expected as the time draws near to make a funding commitment.

"Public agencies have ways of ensuring they can fund projects," Arant said. "It's a little different when you have a private company."

Sweetwater Authority is willing to be patient, said Jim Smythe, operations manager for the authority, which serves the South Bay region of San Diego County.

"Everything's fine," Smythe said. "Of course they've had numerous delays, but it's not as if we're sitting here waiting for water."

Oceanside, Olivenhain, Sweetwater and Valley Center are four of the nine agencies that have agreed to buy water from the Poseidon plant.

The others are the city of Carlsbad, Santa Fe Irrigation District, Vallecitos Water District, Rincon del Diablo Municipal Water District, and Rainbow Municipal Water District.

In denying the appeal, the State Board upheld the Regional’s Board’s determination that the Carlsbad Desalination Project is in compliance with California Water Code Section 13142.5(b) by utilizing the best available site, design, technology, and mitigation measures feasible to minimize the intake and mortality of all forms of marine life.

The State Board’s denial of the appeal marks the third time that it has rejected attempts by the opponents of seawater desalination to obstruct the project. In 2007, and again in 2008, the State Board rejected petitions appealing the Regional Board’s approval of the desalination project and its permit conditions. On March 23, 2010, the State Water Resources Control Board issued its latest ruling that concluded the latest petition “failed to raise any substantial issues appropriate for review by the board”.

Over a seven year permitting period from 2003-2009, the project underwent approximately 20 public hearings and over 100 hours of public testimony and deliberation. In response to the unanimous approval of the project by the state’s environmental permitting and regulatory agencies, the same handful of seawater desalination opponents have unsuccessfully filed a dozen permit appeals, revocation requests and lawsuits in an attempt to delay or derail the desalination project.

“Poseidon Resources is pleased the State Board has denied yet another politically-motivated attempt to stop seawater desalination from becoming a part of California’s drinking water supply,” said Poseidon Resources’ Vice President Scott Maloni. “After spending the better part of the past decade successfully permitting the state’s first large-scale seawater desalination plant, construction of the Carlsbad project has started and the inevitable completion of the plant cannot be derailed by opponents of seawater desalination,” said Maloni.
Phase I of project construction started in November 2009. During the two and half-year construction and start up, the project will create 2,100 jobs and hundreds of millions of dollars in economic stimulus. The facility is scheduled to be operational in 2012.

Since 1998, Poseidon has worked in partnership with the City of Carlsbad, Valley Center Municipal Water District, Sweetwater Authority, Santa Fe Irrigation District, City of Oceanside, Rincon del Diablo Municipal Water District, Olivenhain Municipal Water District, Rainbow Municipal Water District and the Vallecitos Water District to build the desalination plant, which will have the capacity to produce 50-million-gallons-per-day of high quality drinking water and serve 300,000 residents annually.

Poseidon Resources specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks.

Numerous supporters testified and/or submitted letters on behalf of the project, including the California Air Resources Board (CARB), which refuted opponents’ claims that Poseidon intentionally misrepresented and/or omitted material information from the Commission when it approved the Energy Minimization and Greenhouse Gas Reduction Plan in August 2008.

“Poseidon would like to thank the members of the Coastal Commission for rejecting yet another frivolous attempt to obstruct the ongoing construction of the Carlsbad Desalination Project,” said Poseidon Resources’ Vice President Scott Maloni. “We are also grateful to the California Air Resources Board for acknowledging our unprecedented and voluntary commitment to make the desalination project the first large-scale infrastructure project in the state to be net carbon neutral,” said Maloni.

The permit revocation request marked the tenth legal challenge brought against the desalination project by a small handful of seawater desalination opponents led by environmental litigator Marco Gonzalez. All legal challenges heard to date have been dismissed.

“We hope opponents will reconsider their choice to obstruct the project’s inevitable startup and instead opt to work with us in a constructive manner to ensure the project reaches its promise as the most technologically advanced, energy efficient and environmentally-friendly seawater desalination plant in the Western Hemisphere,” said Maloni.

Since 1998, Poseidon has worked in partnership with the City of Carlsbad, Valley Center Municipal Water District, Sweetwater Authority, Santa Fe Irrigation District, City of Oceanside, Rincon del Diablo Municipal Water District, Olivenhain Municipal Water District, Rainbow Municipal Water District and the Vallecitos Water District to build the desalination plant, which will have the capacity to produce 50-million-gallons-per-day of high quality drinking water and serve 300,000 residents annually. Phase I of project construction started in November 2009. During the two and half-year construction and start up, the project will create 2,100 jobs and hundreds of millions of dollars in economic stimulus. The facility is scheduled to be operational in 2012.

Poseidon Resources specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks.

Today, the Coastal Commission also received a letter [attached] from the California Air Resources Board (CARB) Chairman Mary Nichols expressing the agency’s continued support for Poseidon’s Energy Minimization and Greenhouse Gas Reduction Plan (“GHG Plan”). CARB’s letter concludes that there is no new information that would require the Coastal Commission to revisit the GHG Plan. The letter also refutes claims made by opponents that Poseidon intentionally withheld information from the Commission when it approved the GHG Plan in August 2008.

This is the second time opponents have petitioned the Coastal Commission to revoke the development permit that was issued to the desalination project in November 2007. The first revocation request was rejected by a super majority of the Coastal Commission in December 2009.

Although construction of the facility began in November 2009, project opponents, led by environmental litigator Marco Gonzalez, continue to attempt to block advancement of the project. This latest revocation request is an improper attempt to revisit the Commission’s approval of Poseidon’s GHG Plan. Poseidon has made an unprecedented, voluntary commitment that the Carlsbad Desalination Project will be the first large-scale infrastructure project in the state to be net carbon neutral.

Poseidon first made this voluntary commitment, now a condition to the project’s Coastal Development Permit, despite the fact that the desalination plant itself does not emit greenhouse gases, is not regulated by CARB under AB32 (The Global Warming Solutions Act), and the Coastal Commission does not have the authority to regulate air quality emissions in conflict with CARB’s jurisdiction.

Not satisfied with these tremendous commitments, opponents are trying to manipulate the Coastal Commission's limited authority to consider revocation of Coastal Development Permits in order to get the Commission to revisit its GHG Plan approval and to encumber the project with additional unnecessary and financially burdensome mitigation requirements.

“No good deed goes unpunished,” said Poseidon Resources’ Vice President Scott Maloni. “Once again, opponents are attempting to overturn a decision that was made after lengthy public hearings and exhaustive review by the Coastal Commission and other regulatory agencies simply because they disagree with the verdict. Like the previous revocation request, this request is meritless and a waste of the Commission’s valuable time and its taxpayer-funded budget,” said Maloni. “The administrative record is clear and indisputable on this matter; claims made by opponents that Poseidon intentionally withheld information from the Coastal Commission are reckless and unfounded.” said Maloni.

Since 1998, Poseidon has worked in partnership with the City of Carlsbad, Valley Center Municipal Water District, Sweetwater Authority, Santa Fe Irrigation District, City of Oceanside, Rincon del Diablo Municipal Water District, Olivenhain Municipal Water District, Rainbow Municipal Water District and the Vallecitos Water District to build the desalination plant, which will have the capacity to produce 50-million-gallons-per-day of high quality drinking water and serve 300,000 residents annually. Phase I of project construction started in November 2009. During the two and half-year construction and start up, the project will create 2,100 jobs and hundreds of millions of dollars in economic stimulus. The facility is scheduled to be operational in 2012.

Poseidon Resources specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks.

Poseidon has requested the Coastal Commission Chief Counsel and the State Attorney General dismiss CERF as a participant in the Coastal Commission’s permit revocation hearing on February 10. This is the second time in as many months that CERF and other opponents of seawater desalination have requested that the Coastal Commission revoke the permit issued to the desalination project in November 2007. The first revocation request was rejected by a super majority of the Commission.

Coastal Commission regulations only allow revocation requests to be initiated by “person(s) who did not have an opportunity to fully participate in the original permit proceeding ...” (Cal. Code Regs., tit. 14, § 13106). CERF is a newly created environmental litigation organization first registered as a business in the state of California on October 17, 2008. Because CERF did not exist at the time of the original Coastal Development Permit hearing on November 15, 2007, they cannot now participate as a party to the revocation request. CERF’s participation is a violation of Poseidon’s procedural due process rights under the Coastal Act. Poseidon had previously requested the Coastal Commission dismiss CERF as a party to the first revocation request but the Commission did not address the issue at that time. Consequently, Poseidon has now asked the state Attorney General to engage the Costal Commission’s legal counsel.

“Project opponents, led by Coastal Environmental Rights Foundation litigator Marco Gonzalez, have a lengthy history of filing frivolous legal challenges against the Carlsbad Desalination Project,” said Poseidon Resources’ Vice President Scott Maloni. “CERF does not have the legal authority to initiate and participate in Coastal Commission permit revocation proceedings. CERF’s actions are an abuse of the Coastal Commission’s process and a violation of Poseidon’s procedural due process rights. We are requesting that the Coastal Commission enforce their own regulations and remove CERF as a party to the revocation proceedings prior to the February 10 hearing,” said Maloni.

Poseidon has worked in partnership with the City of Carlsbad since 1998 to build the desalination plant, which will have the capacity to produce 50-million-gallons-per-day of high quality drinking water. Once operational, the Carlsbad Desalination Project will provide enough drinking water to serve 300,000 residents annually. Phase I of project construction started in November 2009 and the facility is scheduled to be operational in 2012.

Poseidon Resources specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks.

Every year, hundreds of private developers apply to CDLAC to utilize this financing structure. Since 2005, CDLAC has allocated billions of dollars in PABs to privately-owned companies in California. Projects have included industrial development, redevelopment projects, enterprise zones, facilities that treat water, sewage or hazardous materials, pollution control, solid waste reduction projects and low income multi-family housing. Unlike municipal bonds that also carry a tax exempt status, Poseidon will solely be at risk to pay the principal and interest on the PABs. The state of California and the project’s public water agency customers bear no financial responsibility for the repayment of the bonds.

“Today’s action by the California Debt Limitation Allocation Committee is a major milestone in the financing for the Carlsbad Desalination Project. The allocation of Private Activity Bonds should allow Poseidon Resources to lower the cost of this new drinking water supply for San Diego’s ratepayers,” said Poseidon Resources’ Senior Vice President Peter MacLaggan. “The allocation of Private Activity Bonds clears the way for Poseidon to close project financing and move forward with full-scale construction of the plant,” said MacLaggan.

Poseidon has worked in partnership with the City of Carlsbad, Valley Center Municipal Water District, Sweetwater Authority, Santa Fe Irrigation District, City of Oceanside, Rincon del Diablo Municipal Water District, Olivenhain Municipal Water District, Rainbow Municipal Water District and the Vallecitos Water District to build the desalination plant, which will have the capacity to produce 50-million-gallons-per-day of high quality drinking water and serve 300,000 residents annually. Phase I of project construction started in November 2009. During the two and half-year construction and start up, the project will create 2,100 jobs and approximately $200 million in economic stimulus. The facility is scheduled to be operational in 2012.

Poseidon Resources specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks.

For those of you keeping score, that's five lawsuits and another five permit appeals spearheaded by lawyers representing the Surfrider Foundation and Coastkeeper. To date, these challenges have been rejected. In fact, during the last six years, every permitting and regulatory agency has approved this desalination facility and every court petitioned to overturn the approvals has declined to do so.

A recent public opinion survey conducted by the San Diego County Water Authority showed that a whopping nine out of 10 county residents support seawater desalination, and every state and federal elected official from San Diego County has endorsed the project. No matter what your opinion of the project is after all these years, there is no doubt that it is supported by sound science and the law. With construction of the project under way, environmental extremists have no chance of stopping the desalination facility from being built.

So why do they keep up their antics? Because these obstructionists hope to delay this new water supply and add so much cost that Poseidon will eventually be forced to abandon the project. This is foolish.

Nine San Diego County public water agencies have entered into long-term contracts to purchase every drop of water the plant will produce during the next 30 years, and the only thing the opponents are achieving at this point is driving up the cost the ratepayers will have to pay for the plant's drinking water. San Diegans already struggling in tough economic times should be incensed.

It is a shame that San Diego's news media have failed to press opponents to justify their continued opposition. Instead of asking the tough questions, the news media have lackadaisically reported that a new litigant, the California Environmental Rights Foundation, has joined the fray. Who is this group and where did it come from?

The truth is the project's chief antagonist, overzealous litigator Marco Gonzalez, recently represented the Surfrider Foundation, until Surfrider abandoned its legal strategy when it determined that a significant number of its members did not agree with its position on desalination, and there was little chance they would ever prevail in court. So Gonzalez started the group, an organization with hardly any members, designed to lend credibility to his continued legal assault.

Other than the obvious ethical questions, why is this fact important? Because Gonzalez, under the auspices of his foundation, has twice petitioned the Coastal Commission to revoke the project's permit. However, his foundation has no legal standing to request revocation because it was not a party - and it did not even exist - at the time the commission considered and approved the permits that are the subject of its revocation request.

In his latest permit revocation request, Gonzalez wrongly charges that Poseidon misled the Coastal Commission when it approved the project's greenhouse gas mitigation plan, a condition to the development permit. Never mind that the desalination plant doesn't emit greenhouse gases or that the Coastal Commission does not have the legal jurisdiction to require air quality mitigation, Poseidon did make this voluntary commitment.

In response to Poseidon's voluntary commitment, project opponents attempted to use the greenhouse gas mitigation plan to load up the desalination facility with unprecedented costs they hoped would result in the project's financial collapse. No good deed goes unpunished.

Project opponents were unsuccessful, but now that the Coastal Commission has four new members, Gonzalez is trying to revisit the issue in hopes of generating a different outcome. This tactic begs for review by the attorney general, as the Coastal Commission cannot unilaterally place additional requirements on a vested permit simply because opponents did not like the original decision.

In the end, Poseidon will get past this challenge, too. The public record on this matter is unmistakable and the commission, recognizing the revocation request is frivolous and without merit, will not compromise its integrity ---- and risk a lawsuit ---- to cater to project opponents.

Gonzalez was recently quoted on signonsandiego.com saying he does not care if his legal challenges are ever successful; his objective is to endlessly file appeals in hopes of delaying the project until it finally collapses. This legal conduct might be why Surfrider parted ways with him. Or it could be because opponents have found themselves marginalized by their unjustified opposition to a project that has proven to be environmentally benign.

Consequently, these groups have lost membership and revenue, and if they continue this senseless, obstructionist behavior, they will cost the ratepayers a lot more.

My wish for the new year is that opponents will stop with the nonsense and allow the region to get on with the business of creating high-paying jobs and providing a reliable water supply.

TED OWEN is the president and chief executive officer of the Carlsbad Chamber of Commerce.

The San Diego chapters of the Surfrider Foundation and Coastkeeper have an extensive and unsuccessful history of filing legal challenges (five lawsuits) and appealing Project permit approvals (five permit appeals). The Surfrider Foundation’s decision to abandon its legal opposition leaves Coastkeeper holding out as the sole Project litigant.

“Poseidon Resources and our public water agency customers appreciate the Surfrider Foundation’s decision to put an end to its legal challenges to the Carlsbad Desalination Project,” said Poseidon Resources’ Vice President Scott Maloni. “In doing so, Surfrider has chosen to abide by numerous court rulings and to accept the unwavering determination by the state’s regulatory agencies that the Project is environmentally benign,” said Maloni. “We urge Coastkeeper to follow the Surfrider Foundation’s lead and put the interests of the San Diego region first,” said Maloni.

Poseidon has worked in partnership with the City of Carlsbad since 1998 to build the desalination plant, which will have the capacity to produce 50-million-gallons-per-day of high quality drinking water and serve 300,000 residents annually. Phase one of Project construction started in November 2009. Once operational, the Carlsbad Desalination Project will provide enough drinking water to serve 300,000 residents annually. The facility is scheduled to be operational in 2012.

Poseidon Resources specializes in developing and financing water infrastructure projects, primarily seawater desalination and water treatment plants. These projects are implemented through innovative public-private partnerships in which private enterprise assumes the developmental and financial risks.