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Wednesday, January 28, 2004
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Authority / Poseidon desal Water deal dispute a mystery
By: GIG CONAUGHTON - Staff Writer
San Diego County Water Authority board members are expected to
approve a staff recommendation today to break off three years of
negotiations to build a $270 million plant at Carlsbad's Encina
Power Plant that would turn seawater into drinking water.
Water Authority leaders are recommending backing away from the
project because of a seven-month-long dispute with Poseidon, Inc.,
the private company that started studying the idea six years ago.
The Water Authority has identified the Carlsbad plant and
seawater desalination as critical to the county's future water
supply, partly because Southern California's share of its main water
source, the Colorado River, is shrinking.
If the Water Authority stops negotiating with Poseidon, the company
would be left to continue talks to build a plant at Encina, where it
has a 60-year lease on the property, with the cities of Carlsbad and
Oceanside and others.
However, some water officials wonder if the cities could make the
plant idea work, because they use far less water than the regional
Water Authority ---- which supplies nearly all the water county
residents use through 23 cities and agencies ---- and have far fewer
ratepayers to absorb the plant's cost.
If built, the plant would be the largest ---- and only the second
large-scale ---- plant in the Western hemisphere designed to turn
the ocean into drinking water.
Both the Water Authority and Poseidon are characterizing the looming
break in negotiations as a "cooling off period," and say
that the two sides could resume talks at a later date on the plant.
However, neither side has even been able to agree on the nature of
At the heart of the dispute between the Water Authority and Poseidon
is a confidentiality agreement, a routine pact that negotiating
parties use to protect "trade secret" information.
Water Authority officials say Poseidon isn't using the pact to
protect secret information ---- but to argue that the very idea of
building a desalting plant at Encina is Poseidon's confidential
Ken Weinberg, the agency's director of water resources, said
Poseidon is using the confidentiality agreement as a
"no-competition" pact that would bar the agency from ever
building a plant at Encina ---- unless Poseidon was part of the
"We believe that they're using the agreement ... to say that
the only ones that can do a project at the power plant is
Poseidon," he said.
Poseidon officials say that's not true.
They say the Water Authority wants permission to break the
confidentiality pact, take Poseidon's information ---- data it took
Poseidon six years and millions of dollars to create ---- and to
give it to some other company to build the plant.
Water Authority officials indicated they would like others to
compete on the project.
They say Poseidon is unfairly blocking all competition from outside
companies, and asking public agencies ---- the Water Authority,
Carlsbad and Oceanside ---- to compete against one another.
"And they'll (Poseidon) take whichever deal is best for
Poseidon," Water Authority assistant general manager Dennis
Cushman said. "And whichever deal is best for Poseidon is the
higher price to someone's ratepayers. We think that's a bad
Poseidon officials countered by saying they fairly reached a
long-term lease with Cabrillo Power to secure the Encina site, and
have worked hard to develop a project plan and court customers like
the Water Authority and Carlsbad.
But Weinberg, Cushman and others essentially said this week that
Poseidon's studies aren't secret because the details of extracting
salt from seawater by forcing it through membranes is common
The dispute surrounding the confidentiality agreement began in the
summer of 2003 when Water Authority requested copies of specific
studies that Poseidon had conducted at Encina that the agency said
it needed to prepare an environmental study. Water Authority
officials said the larger question of the "meaning" of the
confidentiality pact arose during discussions over how the specific
documents would be used.
It's not easy to tell who's right or wrong by reading the three-page
It does contain a clause saying that all confidential information
can be used "only for evaluation, negotiation and performance
of contracts with the disclosing party" ---- Poseidon. But it
also contains a clause saying that information could be considered
confidential if the receiving party already had it, or could develop
it on their own.
That has raised the question of whether the Water Authority could
simply enter the Encina Power Plant site and do its own studies to
finish its environmental report.
Water Authority general counsel Dan Hentschke said Wednesday that
the Water Authority asked for permission to enter the Encina site,
but Poseidon denied access.
As a public agency, the Water Authority could use its power of
eminent domain to take the plant site. However, such a move could
trigger a court battle that could delay building the plant for
While questions about who's right or wrong in the dispute remain,
several things are known.
· The Water Authority is
banking on seawater desalination. Cushman said this week that by
2020, the agency wants desalted seawater to account for between 6
percent to 15 percent of the county's water supply. Because of a
dearth of rainfall and reservoirs to store water, San Diego County
imports up to 95 percent of all the water county residents use each
year. A seawater desalination plant ---- or plants ---- would help
to diversify the Water Authority's supply sources, and protect
county residents from running dry.
· Southern California will
have to reduce its reliance upon the Colorado River. The populations
of other Western states that share the river continue to grow, and
California signed an agreement in 2003 guaranteeing those states
that it would cut its traditional over-use of the river by 2015.
· A number of Water Authority
officials clearly regret entering into "sole-source"
negotiations with Poseidon, rather than seeking other bidders when
they entered talks in 2001.
"I kinda wish we had (sought other bidders)," said Jim
Bond, the Water Authority board's vice-chairman. "At the time,
we didn't know what this confidential agreement was. We just thought
it was if they've got some new kind of proprietary information
that's really whiz-bang, brand-new stuff, we would keep it secret
for them. But we haven't seen anything like that."
Contact staff writer Gig Conaughton at (760) 739-6696 or firstname.lastname@example.org.