OTAY WATER DISTRICT DESALINATION PROJECT COMMITTEE MEETING and SPECIAL MEETING OF THE BOARD OF DIRECTORS 2554 SWEETWATER SPRINGS BOULEVARD SPRING VALLEY, CALIFORNIA Boardroom WEDNESDAY December 6, 2017 12:30 P.M. This is a District Committee meeting. This meeting is being posted as a special meeting in order to comply with the Brown Act (Government Code Section §54954.2) in the event that a quorum of the Board is present. Items will be deliberated, however, no formal board actions will be taken at this meeting. The committee makes recommendations to the full board for its consideration and formal action. AGENDA 1. ROLL CALL 2. PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD'S JU- RISDICTION BUT NOT AN ITEM ON TODAY'S AGENDA DISCUSSION ITEMS 3. INFORMATIONAL UPDATE FOR THE ROSARITO DESALINATION PLANT AND THE OTAY MESA CONVEYANCE AND DISINFECTION SYSTEM PROJECTS (KENNEDY) 4. ADJOURNMENT BOARD MEMBERS ATTENDING: Mark Robak, Chair Tim Smith All items appearing on this agenda, whether or not expressly listed for action, may be delib- erated and may be subject to action by the Board. The Agenda, and any attachments containing written information, are available at the Dis- trict’s website at www.otaywater.gov. Written changes to any items to be considered at the open meeting, or to any attachments, will be posted on the District’s website. Copies of the Agenda and all attachments are also available through the District Secretary by contacting her at (619) 670-2280. If you have any disability that would require accommodation in order to enable you to partici- pate in this meeting, please call the District Secretary at 670-2280 at least 24 hours prior to the meeting. Certification of Posting I certify that on December 1, 2017 I posted a copy of the foregoing agenda near the regular meeting place of the Board of Directors of Otay Water District, said time being at least 24 hours in advance of the meeting of the Board of Directors (Government Code Section §54954.2). Executed at Spring Valley, California on December 1, 2017. /s/ Susan Cruz, District Secretary 2 STAFF REPORT TYPE MEETING: Desalination Committee MEETING DATE: December 6, 2017 SUBMITTED BY: Bob Kennedy CIP./G.F. NO: P2451- DIV. NO. ALL Engineering Manager 001101 APPROVED BY: Rod Posada, Chief, Engineering Mark Watton, General Manager SUBJECT: Informational Update for the Rosarito Desalination Plant and the Otay Mesa Conveyance and Disinfection System Projects GENERAL MANAGER’S RECOMMENDATION: No recommendation. This is an informational item only. COMMITTEE ACTION: Please see Attachment A. PURPOSE: To update the Otay Water District (District) Desalination Committee (Committee) on the progress of the Rosarito Desalination Plant and the Otay Mesa Conveyance and Disinfection System Projects (Project)(see Exhibit A for Project location). ANALYSIS: This item was last presented to the Committee as an update at a meeting held on May 23, 2017. The updates or significant milestones that have been reached since the last update to the Committee include: Project Direction Aguas de Rosarito (AdR), a private consortium, signed a 40-year definitive public-private partnership agreement with the State of Baja California (State) on August 25, 2016 to build a desalination plant and conveyance pipeline (Project) and operate it for 37 years. This would be one of the first water projects delivered under the State’s Asociaciones Público Privadas (APP) law. The companies that make up AdR are NuWater of Singapore, Suez Environment of France, and a Mexican company called N.S.C. Agua (NSCA) that is a subsidiary of Cayman-Islands based Consolidated Water (CWCO). The project is stalled at the State of Baja California legislature after several failed attempts to pass a consent decree authorizing the State government to provide financial backup using the pension funds. This is mainly a political issue that AdR hopes to resolve before the end of the legislative session that is scheduled to end mid-December 2017. If the consent decree is not passed during this legislative year, it might have to wait until 2020, after the 2018 presidential elections in Mexico and the 2019 election for Governor for the State of Baja California. The US administration has made several statements about NAFTA, trade, and border wall that has inflamed the situation and provoked a reaction in the Baja California State legislature stalling the consent decree. Rosarito Desalination Project in the News The end of the drought and desalination projects are subjects in the national, state, and local news as well as in Mexico in the State of Baja California. Projects that provide a new supply of water have been mentioned on both sides of the border including the Rosarito Beach Desalination Project. On May 22, 2017, the Water Desalination Report article entitled, “President Approves SWRO Pipeline Permit” about the Presidential Permit granted to the District. The report also noted the permit might signal that the second phase of the project could be accelerated (see Exhibit B). On June 19, 2017, the San Diego Union Tribune published an article entitled, “Could desalinated water from Mexico flow to San Diego?” on the U.S. State Department approval of a cross- border pipeline that could one day carry desalinated water from Mexico to the District (see Exhibit C). The article quotes Cesar Romero Sauceda, head of Tijuana’s Chamber of Construction Industry, “that water has always been a barrier for Tijuana’s growth.” 2 Another article on June 19, 2017 in WaterWorld entitled, “Mexico – U.S. Cross-Border Desal Project Moves Forward” on the U.S. State Department approval of the cross-border pipeline (see Exhibit D). On June 21, 2017, Breitbart published an article entitled, “California May Import Water from Mexico Desalination Plant” about the Project and the State Department’s approval of the permit for the water line on May 16, 2017 (see Exhibit E). On June 23, 2017 an article in NewsDeeply Water Deeply entitled, “Crucial Permit Moves San Diego Closer to Tapping Mexican Desal” about the Project and the District having been granted a Presidential Permit by the U.S. State Department (see Exhibit F). On September 23, 2017, an article in La Jornada Baja California entitled, “Documentos oficiales confirman Proyecto binacional; Kiko Vega lo niega” about official documents confirming that the Rosarito Desal Project is a Binational project. However, B.C. Governor Kiko Vega denies it (see Exhibit G). On September 29, 2017, an article in Fronterra entitled, “Costaran desaladoras de Ensenada y Rosarito mas de 81 mil millones” about the cost for the desal projects in Ensenada and Rosarito, the shortage of water in the region, and the opposition to the PPP (Public-Private Partnership) law (see Exhibit H). On September 29, 2017, an article in ZetaTijuana entitled, “Aprobarán endeudamiento de "Kiko" por 83 mil mdp” about the potential for approval of the use of the pension funds to back up the financing of the project. However, there is opposition from some legislators (see Exhibit I). On November 27, 2017, the San Diego Union Tribune published an article entitled, “Giant Rosarito Beach desalination project faces scrutiny” about the project facing the “scrutiny at a politically sensitive moment. The touchiest public issue is the question of whether some of that water would be sold to the Otay Water District in San Diego County.” The article notes a no vote by the Baja California’s legislature would delay the desalination plant and put on hold eight other public-private- partnership projects (see Exhibit J). 3 Contract with AECOM AECOM continues to finalize their work on the environmental tasks. Staff expects to terminate its contract with AECOM after compiling all of the reports and documents for the federal record with the State Department. All the pending work is expected to be completed by December 2017. Division of Drinking Water (DDW) Permitting (formerly CDPH) On November 15, 2017, the District notified DDW that after three years of source water testing at the power plant intake and outlet structures, AdR will suspend further routine testing and focus on the financial close of Phase 1 of the two phase Project. The results are posted with DDW. Staff and representatives from AdR continue to coordinate on complying with the California Water Resources Control Board Drinking Water Program regulatory requirements related to source water quality testing. Presidential Permit The Department of State issued a Presidential permit to the Otay Water District (the District) on May 16, 2017, authorizing the District to construct, connect, operate, and maintain cross- border water pipeline facilities for the importation of desalinated seawater at the international boundary between the United States and Mexico in San Diego County, California. In making this determination, the Department provided public notice of the proposed permit, offered the opportunity for comment, and consulted with other federal agencies, as required by Executive Order 11423, as amended. This was published in the Federal Register on June 6, 2017 (see Exhibit K). With this approval it is expected Mexico’s federal agencies may need to issue a similar permit to bring symmetry into the approval of a cross border pipeline with the International Boundary and Water Commission, and their counterpart in Mexico, Comisión Internacional de Límites y Agua (IBWC/CILA) as the agencies to administer the transportation of water across the border and to protect the District from local interference in the delivery of desalinated water. IBWC/CILA currently fill this role for the existing pipeline border crossing south of Alta Road that transport Mexico water from Mexico’s allotment from the Colorado River. 4 FISCAL IMPACT: Joe Beachem, Chief Financial Officer No fiscal impact as this is an informational item only.