SAN DIEGO ---- Regional water officials approved a deal Thursday to pay the city of Carlsbad roughly $21.1 million for permission to build a plant there that would turn seawater into San Diego County's first "drought-proof" water supply.

The unanimous approval of the deal by San Diego County Water Authority board members marked the biggest step forward in several years for the proposal to build a desalination facility at the Encina Power Plant in Carlsbad.

City officials approved the deal last week.

But any actual plans to build the plant remain far off because the Water Authority must still reach some agreement with Connecticut-based Poseidon Inc., the company that has been studying building the Encina plant for years and has a 60-year leasehold on the Encina site.

In voting to approve the deal with Carlsbad, Water Authority board members also voted to restart broken negotiations with Poseidon.

The Water Authority ---- which supplies nearly all the water that county residents use each year ---- broke off three years of talks with Poseidon more than a year ago after a bitter disagreement.

Poseidon officials said the dispute was over information it considered confidential.

But Water Authority officials said the argument was over how much money Poseidon wanted for building the plant.

After Thursday's vote, both sides said they were eager to restart negotiations. However, Poseidon officials ---- who faced the possibility of the Water Authority using its power of eminent domain to force its way onto the Encina site ---- seemed more reserved.

"We view the board's action as a very positive development," said a Poseidon senior vice president, Peter MacLaggan. "We met with (Water Authority) staff earlier this week about how to proceed and I think we all had a very positive discussion. We're off to a good start."

Water Authority board member Bernie Rhinerson, chairman of the agency's desalination committee, was more upbeat.

"I'm jumping for joy," he said. "I think this is great. I think the fact the Water Authority and Carlsbad have reached this agreement is a big step forward."

Rhinerson said he hoped the Water Authority and Poseidon could reach agreement by the end of the year, and push the process forward to the California Coastal Commission for review.

Both sides said the plant could be built and operating between 2008 and 2010.

Despite the unanimous approval Thursday, several Water Authority board members asked pointed questions about why the public agency would be paying Carlsbad so much for permission to build on city-owned land.

Under the terms of the deal, the Water Authority would pay Carlsbad $5.5 million, to be spent on specific projects to improve the area near the Encina Plant site ---- which is on the coast ---- such as parks and improved beach access.

In addition, the agency would pay the city about $15.3 million to replace property-tax revenues that the city would lose by having a public agency build a plant in their redevelopment area. None of that money would be paid to the city until, and unless, the plant was eventually built.

"A lot of the clauses deal with things Carlsbad gets," said Keith Lewinger, Water Authority board member from Fallbrook. "What is the Water Authority getting? There's got to be something under that pile of manure. Maybe there's a pony under there. Where's the pony?"

Water Authority General Manager Maureen Stapleton said the agency was getting a lot in return, and that the deal was politically and legally expedient.

Stapleton said the Water Authority was getting Carlsbad's voluntary permission to locate a huge plant on its redevelopment land ---- land where the city could get more in property tax revenue from private development.

And, she said, the Coastal Commission was likely to be more friendly to the proposed project because of the $5.5 million the Water Authority planned to pay Carlsbad for projects to ease any environmental harm the plant might cause.

Contact staff writer Gig Conaughton at (760) 739-6696 or gconaughton@nctimes.com.