A Wave of Desalination Proposals

More than 20 projects to make seawater fit for the tap are being considered in the state. Those from private firms stir debate over public's interests.

By Bettina Boxall
Times Staff Writer

March 14, 2004

CARLSBAD, Calif. — A few hundred yards from the Pacific Ocean, at the end of a labyrinth of blue pipes and filters, Peter MacLaggan fills a plastic cup with water. This, he hopes, is his company's future.

It's purified seawater, stripped of its salts and ready for the tap. MacLaggan's firm, Poseidon Resources, is one of a handful of private companies that want to sell Californians tens of millions of gallons a day of desalinated water just like it.

Their sea-to-tap schemes reflect the state's renewed interest in ocean desalination, which planners say could provide more than 1.5 million Californians with drinking water by 2030.

Though there remain financial and environmental obstacles to desalination, more than 20 desalting proposals are now under consideration on the California coast. Most are from public agencies, including the Los Angeles Department of Water and Power, the city of Santa Cruz and the Municipal Water District of Orange County.

But the most ambitious and potentially controversial are from the private sector, which, with the help of public subsidies, wants to play a major role in developing a new water supply for the state — a responsibility borne largely by the government for the past century.

Poseidon, a small, privately held company based in Connecticut, proposes to build the biggest ocean desalination plants in the Western Hemisphere on the Southern California coast, one in Huntington Beach and one in Carlsbad. Each would be capable of producing 50 million gallons of drinking water a day.

To the north, California-American Water Co., a private utility owned by a German conglomerate, is proposing a 9-million-gallon desalination facility at Moss Landing on Monterey Bay, while a consortium of private engineering companies is floating plans for a 5-million-gallon desalination plant on the shores of Morro Bay.

The private plans have stirred concerns among some public officials and advocacy groups, who worry that a public resource, seawater, will be exploited for private profit and sold to the highest bidder. They further warn that multinational companies could try to use international trade agreements to get around local and state environmental regulation.

Proponents say the public's interests would be protected by long-term contracts with private water companies. They note that private water utilities have operated in California since its infancy and today provide about a fifth of the state's drinking water. And they argue that in an era of government budget cuts and monster deficits, it makes sense for private investors to shoulder the financial risks of getting new technology up and running.

"We need to get creative," said MacLaggan, a senior vice president of Poseidon who joined the company three years ago and previously worked in water supply planning for the San Diego County Water Authority. "I don't think you can say [that] because it's private, it's bad. If we're meeting [quality and quantity] specifications for the life of a contract, it doesn't matter how you get the water there."

Behind MacLaggan hummed the small reverse osmosis demonstration project Poseidon has run in Carlsbad for the last year next to the Encina power station.

A mini-version of what Poseidon proposes to do, the operation takes seawater from the power plant's cooling stream and pumps it under high pressure through a series of sand filters and synthetic membranes laced with billions of holes a fraction of the width of a human hair. The holes are big enough for a water molecule to slip through, but not salts or contaminants. The whole process takes about 20 minutes. Then carbon dioxide and minute amounts of lime are added to counter the water's corrosiveness.

MacLaggan gives a visitor the plastic cup. The contents are clear and flavorless, save for a mild mineral aftertaste.

Advances in desalting technology, pressure on Southern California to reduce its take of Colorado River water and the demands of an ever expanding population have turned the state's gaze to the sea.

"This is a potentially limitless supply of water," observed Charles Keene, executive officer of the state Water Desalination Task Force, which concluded last year that desalination could play a meaningful, if limited, role in meeting California's water needs. The task force acknowledged that private desalination operations raised "unique issues," but did not discount private involvement.

"You may be able to say that, philosophically, [seawater] is a public resource and should not be exploited for profit," Keene said. "But if you want to look at it pragmatically, at water shortages in the future, and say, 'I don't have the financing to bring in additional supplies,' you may wish to look at partnering with private agencies that could amass financing."

Despite a drop in desalination costs over the last decade, desalinated seawater remains at least twice as expensive as conventional water supplies in Southern California.

To develop the market, the Metropolitan Water District of Southern California, the region's largest water supplier, plans to offer subsidies to member agencies. The public water districts could use the money to offset the costs of producing desalinated water themselves or to buy water from a private producer.

A national alliance of water agencies, which includes the MWD and the parent company of California-American, is also lobbying for congressional authorization of hundreds of millions of dollars in federal energy grants to offset production costs.

Poseidon is counting on the MWD subsidies to make its water more attractive to public clients. It also needs approval from local authorities and the state Coastal Commission, neither of which is proving an easy sell.

In January, the San Diego County Water Authority broke off talks with Poseidon over the Carlsbad proposal, saying it objected to a noncompetitive clause that would have barred the authority from developing a desalination plant with any other firm at the Encina site.

And in December, the Huntington Beach City Council voted down the company's proposal to build a $240-million desalination plant next to the AES power station there. The council maintained that Poseidon had not adequately addressed the possible environmental impacts of a coastal desalting operation.

Environmentalists say the plants will promote population growth by creating another water source, threaten marine life with high-salinity discharges and consume large amounts of energy. Poseidon says it can deal with the environmental issues and will keep pushing both projects. But it still has to overcome the skepticism of the Coastal Commission.

In a draft report last year, the commission staff outlined a potential clash between the private sale of purified seawater and the state's Coastal Act, which considers ocean water a public resource to be protected. The document also pointed to several publicized cases in which multinational companies pursuing projects in the U.S. or elsewhere had filed claims under international trade treaties challenging government decisions they said hurt their business.

"Right now we're just asking questions. Right now we don't have the answers," said Tom Luster, an environmental scientist and lead staffer on the report.

Poseidon, formed in 1994 by a group of investors with backgrounds in energy and water development, could contract with international companies to help develop its California projects.

But MacLaggan scoffed at the trade arguments. "It's just ludicrous that we'll be able to say we're a multinational corporation and don't have to comply with the laws of the United States," he said.

The Coastal Commission concerns echo a worldwide debate over the privatization of public services, particularly water utilities.

"When private corporations get in the business, it's in their best interest to sell more [water] and to then even create the problem of demand that needs the technological answer," maintained Maude Barlow of the Council of Canadians, an public interest group that campaigns against privatization. "They're only in it to make money."

But water is already a commodity, argued Adrian Moore, vice president of the Reason Foundation, a think tank in Los Angeles.

"It is a thing we buy now. It's not something we're given for free. We have just as much of a right to food, and we don't believe government should be in the food business," Moore said.

But what would protect the economic interest of the public agencies buying Poseidon water?

"If Poseidon is going to venture their capital and we agree to buy water at a certain rate and define what the rules of the game are, I don't see the risk," said John Schatz, general manager of the Santa Margarita Water District. The agency has a tentative agreement to buy half the output of the Huntington Beach plant.

Still, other officials say they sense public unease with private water development.

"I think the public is very uncomfortable with the privatization of something as essential as water, especially after the energy crisis and [how] we saw the manipulation of energy," said Huntington Beach Councilwoman Debbie Cook, who voted against the Poseidon project and was a member of the state Water Desalination Task Force.

In Florida, where Poseidon developed a 25-million-gallon-a-day desalination facility for the Tampa Bay Water Authority, the public agency bought out the company's interest after two bankruptcy filings — one by Poseidon's original design and construction partner and the second by the parent of the firm that Poseidon then lined up to construct the plant.

"On the front end [Poseidon] brought business acumen and permitting expertise that helped make it possible," said Jerry Maxwell, the Tampa water agency's general manager. "I'm grateful for that contribution. I think at the end we found [that] some things they attempted to do, we were in a better position to do."

The largest seawater desalination facility built to date in the U.S., the Tampa plant began producing water a year ago but has experienced ongoing start-up problems with clogged filters.

Within the water industry, it was seen as a groundbreaking development that would throw open the U.S. market for private desalination efforts.

"The private sector thought they were going to open the market in five years," said Virginia Grebbien, general manager of the Orange County Water District and a former Poseidon executive. "I think it's a 30-year process…. I think the public is more willing to trust the public sector to be good stewards."