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County Declares Regional Desal Project Agreements Invalid

A quartet of letters recently obtained by the Weekly shows just how serious the spat between Monterey County Water Resources Agency and Marina Coast Water District has become:

The county has torpedoed the agreements governing the $400 million Regional Desalination Project.

On July 7, county contract attorney Kevin O'Brien of Sacramento-based law firm Downey Brand put Marina Coast and California American Water on notice that MCWRA is formally initiating the dispute resolution procedure in the water purchase agreement.

The WPA and the related settlement agreement are spring 2010 documents laying out the particulars of who controls the Regional Project (Cal Am, Marina Coast and MCWRA) and who pays for it (Cal Am's ratepayers on the Peninsula), among other details. The California Public Utilities Commission approved the agreements last December, after nearly a year of legal processing and intense advocacy by the project partners.

The county now considers the agreements void, O'Brien writes, because of "the conduct of former MCWRA director Stephen Collins," who is under investigation for alleged conflict of interest. Collins was consulting for RMC Water and Environment, the firm awarded the $28 million Regional Project management contract, while he sat on the MCWRA board, a relationship detailed in the county's third-party Remcho report.

At issue, it appears, is a blame game between MCWRA and Marina Coast: the Remcho report blames Marina Coast and its general manager, Jim Heitzman, for the Collins conflict of interest, while Marina Coast's counterpoint, known as the Markman report, blames MCWRA head Curtis Weeks, along with County Supervisors Lou Calcagno and Dave Potter.

Cal Am, MCWRA and Marina Coast met on June 22 and June 29 in unsuccessful efforts to resolve the Collins dispute, O'Brien's letter continues, so the county wanted to proceed directly to mediation.

A second letter, dated July 20, from O'Brien to Marina Coast attorney Lloyd Lowrey, states that the parties were again unable to reach a resolution at a July 13 meeting. The next step is for senior management of the parties to meet, it said.

A July 21 letter from Lowrey smacks back, contending that Marina Coast does not consider the project agreements void, and that dispute resolution is not necessary. "We are not presently persuaded that the County has been acting in good faith," it reads. "In fact, we cannot understand the County's position and motivations with respect to the [Regional Project], and despite our repeated requests, the County has refused to enlighten us."

The next day, a third letter from O'Brien states that embattled MCWRA head Curtis Weeks is designated as the county's senior management representative, but can't act on behalf of the MCWRA board. It also denies MCWRA's knowledge of a 90-day confidentiality agreement. It is unclear whether that is a reference to the agreement barring Peninsula cities and their officials, along with Cal Am, from talking about the Regional Project; or if a similar agreement binds Marina Coast and MCWRA.

"Other than that response," O'Brien's July 22 letter reads, "MCWRA will not respond further to the numerous assertions in your July 21, 2011 letter. Although MCWRA disagrees with much of that letter, a point-by-point rebuttal would at this point be counterproductive."

The county told the law offices of Michael Stamp, representing The Open Monterey Project, that the O'Brien letters were exempt from public disclosure; however, the county agreed to provide the letters to Stamp's office because Marina Coast attorney Lowrey disclosed their contents.