Will a Huge New Desalination Plant in Southern California Cure Water Woes, or Empty Taxpayers' Pockets?

CARLSBAD, CA – High on a hill above this sunny beach town sits a reservoir filled with water pumped from hundreds of miles away. But the price of that imported water is soaring, and supplies are shrinking. Local officials see salvation to the west – a huge new desalination plant that would turn 300 million gallons a day of the sparkling Pacific Ocean into a new, 50 million gallon river of drinking water.

Down below, Poseidon Resources LLC is pushing to complete a dizzying checklist of approvals before heading to Wall Street for project financing. After 12 years of permitting battles, the desalination plant – which could open the floodgates for many others on the California coast – may finally be built.

Best of all, the developers promise, it will cost the public nothing to build.

“We’ve always proposed that it will be privately financed. There’s no public subsidy for the construction of the desalination plant,” said Scott Maloni, a spokesman for Poseidon, which is based in Stamford, Conn.

But dozens of interviews and a review of available records by the Public Education Center’s DCBureau.org shows that while private equity and bonds would be used for upfront construction, southern Californians would pay at least $640 million over 30 years for the project, including as much as $374 million in public subsidies. All that money would repay construction costs with interest, operating costs with overhead fees, and unspecified profits to investors for what would be the largest desalination plant in the Western Hemisphere.

Company and water officials, along with some industry analysts, say it is well worth the price to bring a local water supply to the drought prone region, as population swells and climate change could begin to wreak havoc with the Sierra snow cap. They say despite recessionary woes, the time is right.

But critics say that far from being a New Age answer to water woes, the plant and others like it are costly, unnecessary boondoggles that often malfunction and carry damaging environmental side effects. They argue keeping water prices artificially low through subsidies for costly desalination plants is the wrong approach, and that conservation, recycling wastewater, and other far cheaper alternatives should be tried first.

Peter Gleick, a water policy analyst who has examined desalination projects around the world, castigated the Poseidon project as a series of “financial travesties.”

“Despite the claims of the company, the cost of this plant is going to be borne by not just the ratepayers, but the taxpayers, including taxpayers who will see none of the water,” said Gleick, executive director of the Pacific Institute in Oakland. He said the project was hobbled by high costs and environmental impacts. “This is a case study in how not to do desalination.”

Officials say those charges are unfair. They say every available water source needs to be tapped, including those Gleick cites and new sources like desalination. They say their project is an environmentally friendly trend-setter, and that because the company has handled all upfront risks, they are more than entitled to a fair return down the road.

“I think it is a great example of a public private partnership,” said Skip Hammann, Carlsbad transportation manager, who is overseeing efforts to bring the plant to his city. Carlsbad could buy up to 80 percent of its water from the plant if it is built. “Where the private company is assuming all the risk and delivering water to the city of Carlsbad at no risk to us, for a rate we would otherwise pay, is a pretty simple concept. It’s gotten very complicated along the way, but the concept is pretty simple.”