1. 1 South Orange Coastal Ocean Desalination (SOCOD) Project, Ocean Desalination Costs and Recent Public Opinions November 2011 Status Update Karl Seckel, Assistant General Manager Municipal Water District of Orange County

2. 2 Goals of Current Work Tasks Conduct studies and evaluations and report to the five Participating Entities on the prospective nature of developing an ocean desalination project at Doheny Beach Conduct studies and evaluations and report to the five Participating Entities on the prospective nature of developing an ocean desalination project at Doheny Beach Assist the five Participating agencies in understanding and making decisions regarding the project Assist the five Participating agencies in understanding and making decisions regarding the project Look for outside funding to take the burden off of the local agencies Look for outside funding to take the burden off of the local agencies Use the Pilot Plant work to understand the issues prior to implementation of the full scale project Use the Pilot Plant work to understand the issues prior to implementation of the full scale project

3. 3 Why Ocean Desalination? A local opportunity A local opportunity Improves SYSTEM and SUPPLY reliability Improves SYSTEM and SUPPLY reliability Cost competitive with imported water Cost competitive with imported water Environmentally friendly concept Environmentally friendly concept At this location, many factors support the project: At this location, many factors support the project:  Right geology  Existing Land  Ability to use a subsurface intake  Integration of the water into the existing system is easy  Need for reliability improvement is there

4. 4 South Orange Coastal Ocean Desalination Project 15 million gallons per day meets about 25% of the 2025 water demands for: 15 million gallons per day meets about 25% of the 2025 water demands for: 1. Laguna Beach 2. San Clemente 3. San Juan Capistrano 4. Moulton Niguel WD 5. South Coast WD All five agencies can physically receive the water into their systems All five agencies can physically receive the water into their systems 1 5 4 3 2

5. 5 South Orange Coastal Ocean Desalination Project Concept Project Layout Layout

6. 6 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 ±

7. 7 Slant Well TDS* and Total Iron

8. Land Surface Fresh Water Infiltration Salt Water “young” marine groundwater “young-midage” brackish groundwater “young-midage” brackish groundwater Low 14-Carbon, Tritium Absent, High Ra isotopes Intermediate 14- Carbon, Low Tritium & Ra isotopes Slant Well High 14-Carbon & Tritium, Intermediate Ra isotopes Monitoring Well “old” marine groundwater “old” marine groundwater Groundwater Fingerprinting and Age Dating Radium Isotopes 224 Ra = 3.66 days 223 Ra = 11.4 days 228 Ra = 5.75 yrs 226 Ra = 1600 yrs

9. 9 99 View of Slant Well and Test Facility Site Doheny State Beach Mobile Test Facility Test Slant Well and Temp Outfall

10. 10 Reverse Osmosis Pilot Test System

11. 11 Corrosion and Microbial Flow Test Apparatus

12. What is the Cost of Ocean Desalination? Many factors to consider Ocean Desalination has been done all over the world US Examples include Tampa Bay which is up and operating Also includes Carlsbad which hopes to go into construction very soon Grant Funding or Subsidies – MET = $250 per AF – State Grant or Loan Interest Loans (2.6%) – Feds 12

13. South Orange Coastal Ocean Desalination Project Project Cost vs Projected Imported Water Cost 2017 Net Project Cost Capital at $215M $1830/AF -$250/AF $1580/AF 2022 2026 13

14. Impacts to Retail Water Costs 14 Estimated at $6 dollars per month per household assuming the agency receives 25% of its water from the plant Estimated at $6 dollars per month per household assuming the agency receives 25% of its water from the plant Decisions regarding the project are not expected soley on unit cost comparisons between ocean desal water and imported water Decisions regarding the project are not expected soley on unit cost comparisons between ocean desal water and imported water The value of reliability provides a large benefit The value of reliability provides a large benefit We are now testing an economic and financial model to better understand the cost impacts and potential offsets for the project. We are now testing an economic and financial model to better understand the cost impacts and potential offsets for the project.

15. 15 Example 1 - High Cost Low MET Rates

16. 16 Example 2 - Low Cost High MET Rates

17. Ocean Desalination Costs Around the World ($/AF) Courtesy of Water Desalination Report; Presented at the Texas Innovative Water Workshop, San Antonio, Texas, October 11, 2010

18. Major Cost Components for an Ocean Desalination Project The RO Treatment Plant Pre-treatment (if necessary) Intake System Brine Disposal System System Integration for the product water (pump stations, pipelines and reservoirs) Power costs

19. Major Cost Factors for Australian Plants Compared to SOCOD Project Major Factors Driving Unit Costs Higher Long and costly new intakes (shafts, tunnels, risers) Long and costly new brine disposal pressurized lines Long and costly integration – long lines and high lifts Renewable energy projects Alliance Delivery, Rushed Projects Major Factors Driving Unit Costs Lower Economies of scale (large plants) Less stringent product water quality (boron, bromide) Net Effect = Much Higher Unit Costs than SOCOD

20. Other Key Factors Affecting Costs Plant Size – Bigger is Better Source Water Quality - TDS, Temperature, Solids, Silt and Organics Content. Product Water Quality – TDS, Boron, Bromides, Disinfection Compatibility. Concentrate Disposal Method; Power Supply & Unit Power Costs; Project Delivery Method & Financing; Other Factors:  Intake and Discharge System Type;  Pretreatment & RO System Design;  Plant Capacity Availability Target.

21. Key Reasons for Cost Disparity Between High-End & Low-end Cost Projects Desalination Site Location – Costly Plants Have Overly Long Product Water Delivery Pipelines 120 MGD Melbourne Plant – Cost of Plant/Delivery + Power Supply Systems = US$1.7 BB/1.1 BB (50 miles) 66 MGD Sydney SWRO Plant – Cost of Plant/Delivery System = US$560 MM/US$490 MM (10 miles of underground tunnel under Botany Bay). Environmental Considerations – Complex Intakes & Diffuser Systems Phasing Strategy – Intake and Discharge System Capacity; – Pretreatment & RO System Design; Labor Market Pressures Method of Project Delivery & Risk Allocation

22. Be Careful When Comparing Costs! Projects Differ By: – Source Water Salinity and Temperature; – Product Water Quality; – Unit Cost of Construction, Labor and Permitting; – Cost of Capital; – Unit Cost of Power; – Source of Equipment Supply; – Project Completion Schedule. Projects Have to Be Normalized for These and Other Factors for Accurate Comparison.

23. Lewis Consulting Public Opinion Survey October 2011 MWDOC Service Area 500 Orange County Registered Voters

24. Considering only the utilities that you pay for, which would you say is the best value for the amount of money you pay?

25. During the past year, would you say your household's water usage has been increasing, staying the same or decreasing?

26. What was the primary motivation for you to cut back on water usage?

27. Do you believe the cost of water is expensive, fair or reasonable, or inexpensive?

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29. Which of the following 7 options do you believe would be most effective in solving water shortages?

30. When thinking about increasing Orange County's water supply, do you think Ocean Desalination is a good idea or a bad idea?

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32. If the election were held today, would you vote yes or no on the $11.4 Billion, Safe, Clean and Reliable Drinking Water Supply Act of 2012?

33. Would you consider voting yes if the amount of the bond was lower?

34. 34 Questions? Thank you!