SAN FRANCISCO — Poseidon Resources is seeking a $530 million private-activity bond cap allocation from the California Debt Limit Allocation Committee this month in a bid to build the West Coast’s first large-scale desalination plant.
The Carlsbad Desalination Project would provide 50 million gallons of water a day, enough for 300,000 people, from the Pacific Ocean to nine San Diego County water agencies and decrease the region’s dependence on imported water.
The California Coastal Commission approved a Coastal Development Permit for the plant this week over objections from environmentalists who are worried about the plant’s impact on fish and its intensive energy use. Developers plan to begin site preparation next week.
“We’re inching along and getting much closer,” said Scott Maloni, Poseidon’s vice president for project development. “We got our last permit issued.”
Arid California is in the third year of a drought, and Southern California is the state’s driest region. Depending on the year, the San Diego County Water Authority imports 75% to 95% of the region’s water from the Colorado River and Northern California.
Local officials hope to use desalination to diversify their water supplies. Nine public water agencies have signed water purchase agreements with the Carlsbad Desalination Project.
The agencies are seeking subsidies from the Metropolitan Water District of Southern California to bring the price of desalinated water into line with imported water. The district subsidizes desalination, conservation and local groundwater recovery through its Local Resources Program.
The San Diego County water utilities are seeking incentive payments that equal the difference between the cost of desalinated water and Met Water’s full-service treated water rate, up to a maximum of $250 per acre-foot. Met Water’s staff has recommended that its board approve the agreement at its meeting next week. The subsidies would cost the agency about $14 million a year, or $350 million over the next 25 years.
Poseidon is also seeking public assistance in the form of an especially large allocation of tax-exempt private-activity bonds. Maloni said Poseidon will be able to charge local water agencies less for water if it gets tax-exempt financing.
He said the company hopes that recession-dented demand for PAB allocations will leave room under California’s $3.31 billion 2009 allocation for the big Carlsbad project.
The California Debt Limit Allocation Committee has allocated less than $1 billion of the private-activity bond cap for 2009 and has about $2.4 billion of cap remaining. Gov. Arnold Schwarzenegger, Treasurer Bill Lockyer and Controller John Chiang are represented on the committee, which meets Nov. 18.
In June, Poseidon hired Barclays Capital to serve as financial adviser on the project.
The private water utility has been planning the Carlsbad Desalination Project since 1998 and began seeking permits in 2003. The project required approvals from the city of Carlsbad, the State Lands Commission, and the San Diego Regional Water Quality Control Board in addition to the Coastal Commission.