Poseidon Resources is gearing up for negotiations with Orange County water agencies interested in buying the 50 million gallons of purified ocean water its Huntington Beach Desalination Plant is expected to produce each day. Eighteen O.C. water agencies have signed nonbinding letters of intent, indicating their interest in purchasing desalinated water. The agencies will meet privately with Poseidon officials Thursday to dive into details that will drive negotiations.
Path to desalination
1998: Poseidon introduces plans for desalination plant in Huntington Beach
December 2000: Municipal Water District of Orange County signs nonbinding agreement to buy desalinated water
June 2001: MWDOC terminates agreement
December 2001: Huntington Beach planning department receives application for project
Fall 2002: Poseidon releases draft environmental impact report
December 2003: Huntington Beach City Council rejects project on a 4-3 vote
February 2006: Huntington Beach council votes 4-3 to approve plant
March 2006: Multiple environmental organizations appeal plant’s approval
August 2006: Santa Ana Regional Water Quality Control Board approves permit for plant
November 2006: Judge throws out lawsuit by environmental groups
October 2010: State Lands Commission approves project
January 2013: Poseidon begins building Carlsbad plant; to meet with O.C. agencies to discuss purchase agreements
Summer 2013: Poseidon hopes to get final permit for Huntington Beach plant from California Coastal Commission
Late 2013: Company hopes to secure purchase agreements with MWDOC or O.C. water retailers
Summer 2014: Poseidon aims to start construction on Huntington Beach plant
Early 2016: Carlsbad plant expected to come online
Summer 2017: Huntington Beach plant expected to begin operation
Demand is High
Demand for the water is projected to exceed supply by nearly 43 percent, according to those letters.
Districts that have signed them have requested a total of 80,960 acre-feet of drinking water a year from Poseidon once the plant comes online, anticipated in summer 2017. The plant will produce 56,000 acre-feet of drinking water each year, with each acre-foot enough to meet annual needs for two families of four.
Three different options are on the table for how area retailers will get that water from Poseidon, according to Jessica Ouwerkerk, spokeswoman for wholesaler Municipal Water District of Orange County.
Higher Price Tag
While the rate for desalinated water will undoubtedly be higher than what O.C. residents pay now, Poseidon has staked millions of dollars and 15 years of planning on the belief that customers will be willing to pay more to have “locally controlled, drought-proof” water, as company Vice President Scott Maloni puts it.
“What is the value of that reliability to them?” Maloni said. “That is the question they have to ask themselves.”
A purchase agreement with The San Diego County Water Authority shows desalinated water from Poseidon’s Carlsbad plant, which recently started construction, will increase the average household’s water bill by $5 to $7 a month.
John Kennedy, a senior manager with Orange County Water District, said pressure to keep prices down should be greater here.
While residents in San Diego County are heavily dependent on ever-pricier imported water, nearly all of north and central O.C. has access to water from an underground aquifer. At $266 per acre-foot, local groundwater costs three times less than water pumped in from the Colorado River or Northern California – and up to eight times less than desalinated water in Carlsbad is expected to go for.
O.C. water agencies will almost certainly expect to also get some subsidy for buying the pricier desalinated water and saving ground or imported water for a non-rainy day, Kennedy said. Those subsidies likely would come from Metropolitan Water District of Southern California, which already offers a $250 per acre-foot subsidy to agencies for saving imported water.
One thing that could help keep rates lower for O.C. residents is that Poseidon can take advantage of infrastructure already in place at the AES power plant, where Poseidon has leased 11 acres of land for its plant.
Poseidon expects to use AES pipelines to draw and discharge water 1,500 feet offshore in deep seas. The discharged water has a high salinity content, and the state is requiring Poseidon to draw 100 million gallons of ocean water to produce 50 million gallons of drinking water. The distance from shore and the depth of the discharge will allow the high salinity water to mix with ocean water more quickly, mitigating the environmental effects.
In Carlsbad, Poseidon must build needed infrastructure and is discharging water much closer to shore at shallower depths. There, the state said the company must pump three times more seawater to produce the same amount of drinking water, driving up operation costs.
Question of Transparency
As price negotiations advance, water agencies representing more than a million residents have signed confidentiality agreements with Poseidon. Agencies including the cities of Anaheim and Garden Grove, and Irvine Ranch and Santa Margarita water districts agreed not to disclose any information Poseidon deems confidential until negotiations are finalized.
“We have committed to full transparency,” Maloni said. “This won’t be a black box deal.”
That transparency, though, will be with county water retailers rather than directly with the public. Maloni said that’s because interested buyers will be receiving proprietary information that would put Poseidon at a competitive disadvantage with other developers if it were made public.
Staffers with the Trabuco Canyon Water District, whose board approved signing a confidentiality agreement Wednesday, said Poseidon also is looking to avoid “negotiating in the press” the cost agencies should pay for desalinated water.
The caution comes after water district officials in San Diego County told media outlets the company’s Carlsbad desalination plant would increase the average water bill by anywhere from 5 percent to 20 percent each month.
Though Maloni said the confidentiality agreement is “not a critical path item,” water district officials said they were told they’d be excluded from future discussions such as Thursday’s meeting if they didn’t sign the document.
That’s why East Orange County Water District won’t be participating Thursday. District staff joined a workgroup to discuss the project, but General Manager Lisa Ohlund said they aren’t able to continue sitting in on talks without the confidentiality agreement in place – and that’s an agreement her district isn’t willing to sign.
The way the agreement is written, Ohlund said, would prevent the district sharing information even with staff at the city of Tustin, for example, which buys water wholesale through East Orange County Water District and might be interested in striking a deal with Poseidon itself. Also, Ohlund said her board is uncomfortable with the potential overlap between what public agencies such as hers are required to disclose and what Poseidon could potentially ask them to withhold.
Staff writer Jaimee Lynn Fletcher contributed to this report.
“Desalination must be included in any discussion of future water sources for Orange County."