In 1998, Poseidon Resources (News), a Connecticut-based company that develops, invests and manages water-supply projects, began looking into the feasibility of constructing a seawater desalination plant, capable of producing 50 million gallons per day (mgd) near the Encina Power Plant in Carlsbad.

During the process, Poseidon entered into discussions with the San Diego County Water Authority about partnering on the project. Since then, both Poseidon and SDCWA have concluded separate environmental impact reports and plans for the project.

On Wednesday, the Carlsbad Planning Commission will convene a public hearing to consider a suggestion from staff to recommend to the City Council certification of Poseidon's final environmental impact report for the project and approval of all of the local entitlements necessary for the project to move forward, according to Peter MacLaggan, senior vice president of project development for Poseidon.

The Daily Transcript sat down with MacLaggan to learn more about the project and the company’s relationship with SDCWA.

Can you describe the current Poseidon plans for the Encina Power Plant?

What we are contemplating in Carlsbad is a 50 mgd seawater desalination plant that would serve the needs of the city of Carlsbad and the surrounding community. So it’s enough water supply for roughly 300,000 San Diego County residents or 112,000 households. The desalination facility is capable of producing a very high-quality drinking water supply and the goal here is to improve water quality in the community and enhance the reliability of water, in that the Pacific Ocean is not going to dry up during a drought. And the goal is here to make sure that we’ve got at least one of our supplies that comes from a souce that will enable us to continue to have water, regardless of whether it snows in the Sierras or the Colorado Rocky Mountains.

Is this the first time a desal plant has been proposed for the location?

Actually, initially the very first proposal for a desalination project at Encina Power Station was put forward by the U.S. Department of the Interior. I’ve got a study here that they published in 1972 that contemplated a 40 mgd sea water desalination plant at that location.

But you have a small-scale test desalination process already functioning at the plant. You’ve completed an EIR. Was Poseidon the first to act on such an idea?

There’s been three proposals at this site. The first two were abandoned because of the costs. The federal government’s effort and then the San Diego County Water Authority looked at a facility at this location in the early 1990s. They similarly abandoned the plant because the water was too expensive. I think they were looking at that time at about $1200 to $1600 an acre foot, compared to at that time our imported water probably cost about $400 an acre foot.

Poseidon initiated its efforts in 1998, and we submitted a detailed project plan to the city of Carlsbad in 2001 that contemplated the ability to build a 50 mgd plant at that location and produce water for just under $800 an acre foot -- so considerably lower than what that had been envisioned by the previous efforts. And meanwhile the cost of imported water had gone up, so this $800 an acre foot was looking pretty attractive. And it certainly caught the attention of the officials in Carlsbad.

How did the SDCWA become involved?

Well, since we were looking at a large-scale facility that exceeded the needs of the city of Carlsbad, Mayor Lewis, who sits on the County Water Authority board, encouraged them to participate in the project partnership that was moving forward with the city and Poseidon.

Subsequently, Oceanside got involved as well. And Carlsbad and Oceanside and the SDCWA shared in the cost of an extensive due diligence review of Poseidon’s proposal. And that effort took place in the spring of 2002. It culminated in conclusions that found that the project was technically viable, the water supply was affordable, and it was feasible to construct a desalination plant at that location. And there was also further consideration given to the fact that Poseidon was prepared to take on all the risk of engineering, constructing, owning and operating this plant. And that was perceived as a good thing from the perspective of the rate payers, in that if anything did go wrong, those costs would be born by the private sector, not by the public sector and the rate payers.

The SDCWA eventually came up with its own proposal?

That’s correct.

Why?

In 2004 the County Water Authority board concluded that it would be in the region’s best interest if Carlsbad and Poseidon proceed with developing the project rather than continue with direct negotiations with SDCWA and Poseidon and Carlsbad together. In February 2004, the CWA sent a letter to Carlsbad supporting their efforts to develop a desalination plant at that location and subsequent to that the Carlsbad Municipal Water District, which is a subsidiary of the city of Carlsbad. Valley Center Municipal Water District and the Rincon Del Diablo municipal water districts all entered into contracts with Poseidon to buy the output of the plant. It was in August 2004 that the CWA board of directors approved a staff recommendation to reopen the discussions with Carlsbad and Poseidon and simultaneously continue with independent planning on environmental studies for a CWA-owned and operated regional desalination project at the Encina Power station.

What’s the current status of the relationship between Poseidon and SDCWA?

We continue to negotiate efforts to merge our respective interests in this project. We’ve been doing so for little over a year now, since we resumed negotiations. And at this juncture I think all parties remain confident that we can merge these efforts and move forward with a joint project. It doesn’t make sense at this point for two projects to be built at one location to serve one regional need. So I think all of us have a mutual interest in merging our efforts and moving forward together.

What are the possible outcomes of the negotiations?

There are two entities proposing a desalination plant at the same location in Carlsbad. So Poseidon, having entered into long-term contracts with water districts for 60 percent of the output of the supply -- it leaves the other 40 percent available for the CWA or others to pick up and acquire. So there’s two possible outcomes. We’re going to move forward jointly in partnership with Carlsbad, Valley Center, Rincon and the Water Authority. Or alternatively, we won’t conclude the discussions with the Water Authority; we’ll move forward with the project with other local water agencies.

In working in what is essentially a public utilities niche have you found that the playing field is level for a private company?

You need to understand what it is we provide. We’re a company that invests in water infrastructure. We manage water and wastewater projects on behalf of governmental entities or in partnership with governmental entities. And in doing so, we provide value by taking the risk for that development and permitting activities and the construction and operation of those facilities, providing a guaranteed quantity quality and reliability of that supply at a predetermined price.

But essentially you’re competing with SDCWA. If you weren’t here, SDCWA would go ahead and build their own plant. Right?

They certainly can and are empowered to do so. I think what you have to look at in assessing the best way to proceed is to look at the value that’s to be added by a partnership. The private sector is able to bring forward financing and take on the risk of development without exposing the rate payer to any of the downsides should things not move as quickly or cost-effectively as one would have hoped. So when a public agency takes on that risk, they’re doing so using the ratepayers as the ultimate backstop should there be a problem in that undertaking.

Poseidon is involved with a similar desalination project in Huntington?

Yes, we are.

Have you learned anything from the joint processes in Huntington and Carlsbad?

I think we’ve learned several things. First and foremost, the public education and outreach component with these projects is absolutely critical. It’s something that we spend a lot of time and effort ,making sure that we work closely with community leaders and residents, stake holders in the communities where we do business to make sure they’re well-informed as to what this project activity is all about and how it affects their businesses and lives.

And the other thing we’ve learned is critically important is you need to deploy the right mix of technology and design in advancing a sea water desalination project to ensure that it’s sensitive to the local environment and the needs of the community. I think the combination of those three are the ingredients that make a successful project.
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Addendum

Ryan Huston has joined RBF Consulting as project manager and associate in the firm’s Temecula office. Huston brings over 10 years of experience in the planning and design of a variety of water and wastewater projects with responsibility in project management. He comes to RBF from Elsinore Valley Municipal Water District, where he was project manager for a variety of water and wastewater CIP projects including water wells, reservoirs, pipelines, pump stations, sewage lift stations and master plans.
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Send your comments, thoughts or suggestions to jeran.wittenstein@sddt.com