Dana Point Ocean Desalination Project Project Update May 2007

2 Summary Construction of a 15 million gallon per day Dana Point Ocean Desalination plant using a slant well subsurface intake facility to produce about 16,000 AF per year is FEASIBLE Project cost = $136 million Cost of water = $1287 per acre foot The project is sensitive to environmental issues and supported by Surfrider Foundation and others Work completed is of benefit to the San Juan Groundwater Basin

3 Dana Point Ocean Desalination Project Facility Layout

4 Dana Point Ocean Desalination Plant 15 MGD meets about half of the 2025 water demands for Laguna Beach, San Clemente and South Coast WD For all eight SOC agencies, demands are currently about 115 mgd; meets about 13% of demands Dana Point Ocean Desalination Plant Service Area

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6 What we want from you? Understanding of project potential and risk Info needed to enable decision by local agencies to move project forward Interest in forming a JPA to move the project forward

7 Why Ocean Desalination? Supply Reliability  New dependable potable water supply source  Independent of hydrologic cycle  Consistent with MET’s IRP  Delta export risks (Earthquakes, Fisheries)  Climate change  Threats to import supplies System Reliability  Local supply under local control  Supply at end of distribution system  Emergency supply at constant delivery rate MET Funding

8 Challenges to Water from Northern California San Francisco Bay/ Sacramento - San Joaquin River Delta  Hub of State’s water system  Degraded ecosystem/fishery  Vulnerable levee system  Peat soils/drainage – DBP precursors  Climate change, flood and water supply impacts State Water Project Los Angeles Aqueduct Sacramento Colorado River Aqueduct Los Angeles Delta Delta San Francisco

9 Sacramento Stockton Bay Area Sherman Island Holland Tract Webb Tract Jones Tract McDonald Tract New Hope Tyler Venice Brannan Island Historical Island Flooding (since 1960) 162 Delta levee breaches have occurred in past century

10 Challenges to Water from the Colorado River  Growth in other basin states  Over allocation  Climate change, extended drought  Mexico claims  Salinity and water quality

11 Dana Point Ocean Desalination Site Diemer Filtration Plant  Imported water = 95% of potable supplies  Single water treatment plant and two pipelines serve more than 500,000 residents and businesses  Few local resources  Emergency outage of the import system could cause significant economic problems South Orange County Challenges

12 Multi-year investigations 2002 proposal to MET to preserve $250 per AF incentive for 28,000 AF ($174 Million) 2005 test borings determined depth and verified highly permeable alluvium at shoreline 2006 test slant well demonstration project 2006 SOCWA Outfall Capacity Study 2007 SDG&E electrical service study 2007 Groundwater modeling results: 30 mgd ocean intake is feasible to produce 15 mgd of potable water  Drawdown impacts to South Coast wells can be mitigated

13 Test Slant Well Test Slant Well Drilling Site

14 Test Slant Well Schematic Ocean Surface Land Surface Fresh Water 325 feet Test Slant Well Infiltration Drill Rig Ocean Bottom Main Aquifer 40 to 130 feet ± Salt Water 23 o 350 feet ±

15 Subsurface Slant Well Intake System Advantages Avoids ocean impacts from construction and entrainment/impingement Provides pretreatment benefit and shock load protection against red tides, storms, etc. Functions as a ocean water intrusion barrier Cost-effective technology and potential lower life-cycle costs compared to conventional intake systems Work to date supported by environmental organizations  Letter of Support from Surfrider Foundation

16 Drilling Site on Doheny Beach

17 Dual Rotary Drill Rig Test Slant Well

18 Testing Set Up

19 Dual Rotary Drill Rig

20 Welding Screen Joints

21 Desalination Plant Site Feedwater Supply Facilities Subsurface Slant Wells and Buried Collector Intake System SOCWA Outfall

22 Key Findings from Engineering Feasibility Report - 1 Project Sized at 15 million gallons/day (MGD) Distribution of water to South Coast, San Clemente, San Juan Capistrano, MNWD and Laguna Beach is FEASIBLE Subsurface intake system is the lowest cost and least impacting feedwater supply option Makes good use of existing facilities  Concentrate disposal capacity available in SOCWA Ocean Outfall  System integration is straightforward

23 Key Findings from Engineering Feasibility Report - 2 Subsurface water is naturally filtered; treatment before reverse osmosis membranes is not necessary – saves $30 million capital and $50 million life cycle Groundwater Modeling predicts low iron and manganese levels – treatment not needed Extended pump test and pilot plant is necessary to verify findings and to complete check on groundwater modeling work

24 Key Findings from Engineering Feasibility Report - 3 Capital Cost Estimated Base Cost $104 M Contingency Allowance $32 M Total Budgetary Cost $136 M O&M Cost Energy Purchases $7.0 M/yr Other O&M Costs $4.7 M/yr Total O&M Cost $11.7 M/yr Notes: (1) Electrical energy at 11.5¢ (SDG&E applicable rate) (2) Land and site preparation in contingency

25 Unit Project Costs Project Yield  Capacity at 15 MGD  Yield at 95% Load Factor = 15,962 afy Cost Per Acre-Foot of Yield (1)  Capital $552/af  Energy $438/af  O&M $297/af Total $1287/af Notes: (1) i = 5%, n = 30 years (2) Electrical energy at 11.5¢ (SDG&E applicable rate) (3) Land and site preparation in contingency

26 Project Costs vs Future MET Treated Water Rate How do future projected MET treated water rates compare with the ocean desalination project costs  MET rates are anticipated to escalate at 4% to 6% per year for next 10 years  Projected rates beyond 2016 are subject to many issues – CALFED (Delta fix), replacement and refurbishment costs, power costs, environmental mitigation, etc.  Hard to predict future MET rates

27 MET Treated Water Rate

28 Project Unit Costs vs MET Rate

29 Project Unit Costs vs MET Rate $319 per AF = $56 M (present value)

30 Project Unit Costs vs MET Rates

31 Ocean Desal Costs Technology advancements will lower desalination capital and O&M costs Membrane and energy recovery technology  More efficient and fouling resistant membranes are in R&D and commercialization (e.g. UCLA, others)  Improvements expected in pumping/energy recovery Advanced design solutions  Larger diameter vessels will reduce RO membrane system and facility capital costs  Other

32 Energy Use Metrics Comparative Energy Requirements  Desal + Distribution 3800 kwhr/af  Imported water to SOC 3240 kwhr/af  SWP GW-Ag Transfers 3840 kwhr/af Comparative Energy Use Metrics  Desal per capita 1.5 kwhr/day  Personal Computer (4hrs) 1.1 kwhr/day  Refrigerator 8.0 kwhr/day

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34 kw-hr per AF

35 Green Energy for Desal Solar requires 2.3 acres and $8 to $10M investment to develop 1 megawatt of power for 6 hours per day SDG&E is working on attaining 20% renewable energy portfolio by 2012  Peak System Demand is 4290 MW in 2015  Dana Point Desal Project is 8 MW = 0.2%

36 Dana Point Ocean Desalination Project A Multiple Purpose Project New south of Delta dependable water supply Cost is fairly expensive Protection from outage of regional system  Benefits equivalent to a supply rate of 23 cfs or a storage volume of 1425 AF (31 day outage) Water quality benefit for recycling opportunities Provides ocean water intrusion barrier for the San Juan Groundwater Basin  Especially helpful during extended droughts Environmentally acceptable project

37 Agencies involved to date:  Federal Agencies oU.S. Bureau of Reclamation oU.S. EPA oU.S. Fish and Wildlife Service oU.S. Army Corps of Engineers  State Agencies oCalifornia Department of Water Resources oCalifornia Department of Parks and Recreation oCalifornia Coastal Commission oCalifornia State Lands Commission oCalifornia Department of Fish and Game oSWRCB and San Diego Regional Water Quality Control Board  Local and Regional Agencies oSouth Coast Water District oLaguna Beach County Water District oCity of San Clemente oMoulton Niguel Water District oCity of Dana Point oSouth Orange County Wastewater Authority oSan Juan Basin Authority oCounty of Orange oMetropolitan Water District of Southern California

38 Next Steps Outreach, Briefings and Formation of Joint Powers Agency (JPA) Extended Pumping Test and Pilot Plant Process Study  Cost: $3.6 to $4.2 Million  Duration: 3½ years  Schedule: June 2007 through Dec 2010  Accept DWR grant of $1.5 M  Seek Federal and Other funding  JPA funding to initiate CEQA and Permitting

39 Cost for Next Steps Local agency costs for extended pump test and pilot plant construction and operation estimated between $100,000 to $350,000 per year per agency over next 3 years (depends on outside funding and number of agencies)

40 Project Timeline South OC Water Reliability Study Pre-Feasibility Study Hydrogeology Investigation Test Slant Well/System Modeling Engineering Feasibility Report Formation of Joint Powers Agency Agreements/Pilot Plant and Testing Project CEQA/NEPA, Permits Design/Build/Operate contract on-line

41 Project Funding and Grants Goal is to get the local cost of the desal water close to the cost of MET water Work to obtain greater MET participation Support efforts for tax credit bonds  New Water Supply Coalition  MET Board action to sponsorship Federal legislation Work to procure Federal and State grants