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Home My WebLink About2006-09-26; Municipal Water District; 618; Amendment to Water Purchase AgreementCARLSBAD MUNICIPAL WATER DISTRICT - AGENDA BILL 1 AB# MTG. DEPT. 618 9-26-06 Admin. Services APPROVAL OF AMENDMENT TO THE WATER PURCHASE AGREEMENT DEPT. HEAD -§& CITY ATTY. S$JZ> CITY MGR. ljj^ RECOMMENDED ACTION: Adopt Resolution No. 1277 approving an amendment to the Water Purchase Agreement dated September 28, 2004, between Poseidon Resources and the Carlsbad Municipal Water District. ITEM EXPLANATION: On September 28, 2004 the CMWD Board entered into an agreement with Poseidon Resources regarding the purchase of water for a proposed desalination facility to be located near the Encina Power Station (the Water Purchase Agreement). Section 2.3 of the Water Purchase Agreement, Termination Prior to the Commercial Operation Date, states that if certain events have not occurred by 24 months from the original agreement date, either party may terminate the agreement. Section 2.3.1 provides a list of seven events that must be completed by the September 28, 2006 deadline. These include: • Certification of the EIR for the project. • Poseidon entering into supplemental agreements for the sale of water from the plant. • Developing tests to determine the effect of desalinated water on the CMWD transmission and distribution system, and consumer plumbing systems. • Establishing a concentration limit for Boron in the water produced by the desalination plant. • Determining the point at which the desalinated water transmission system will connect to the CMWD water system. • Development of a delivery regime for desalinated water to CMWD. • Obtaining consent from Cabrillo Power, where necessary, for any terms, conditions, or agreements related to the desalination facility. CMWD and City staff is working with Poseidon Resources to complete the above tasks; however, it will be necessary to ask the CMWD board, at a future meeting, to approve a formal amendment to the Water Purchase Agreement allowing additional time for the completion of certain tasks. At this time, staff is negotiating the terms of an extension for completion of the tasks listed in section 2.3.1. However, staff is not ready to ask the Board to take action on a formal amendment at this time. Negotiations are continuing between Poseidon Resources and staff, and certain terms will require additional time to resolve. Therefore, staff is asking the Board to allow a short one-month extension of the deadlines described in 2.3.1, thereby allowing staff to complete negotiations and present a completed amendment to the Board at a future meeting. If approved by the Board, the attached agreement between CMWD and Poseidon Resources would extend the deadline for completion of the work described in 2.3.1 to November 30, 2006, providing staff with one month to complete negotiations and time to prepare an agenda bill for Board consideration. FISCAL IMPACT: None. ENVIRONMENTAL IMPACT: None. EXHIBITS: 1. Resolution No. 1277 approving an amendment to the Water Purchase Agreement between Poseidon Resources and CMWD, dated September 28, 2004. 2. Second Amendment to the Water Purchase Agreement. DEPARTMENT CONTACT: Jim Elliott, 760-602-2409, ielli@ci.carlsbad.ca.us FOR CITY CLERKS USE ONLY. BOARD ACTION: APPROVED DENIED CONTINUED WITHDRAWN AMENDED B/ D D Da CONTINUED TO DATE SPECIFIC CONTINUED TO DATE UNKNOWN RETURNED TO STAFF OTHER - SEE MINUTES D D D D EXHIBIT 1 1 RESOLUTION NO. 1277 2 A RESOLUTION OF THE BOARD OF DIRECTORS OF CARLSBAD MUNICIPAL 3 WATER DISTRICT (CMWD), APPROVING A SECOND AMENDMENT TO THE 4 WATER PURCHASE AGREEMENT DATED SEPTEMBER 28, 2004 5 6 7 WHEREAS, the Board of Directors of the Carlsbad Municipal Water District 8 approved a Water Purchase Agreement (Agreement) with Poseidon Resources (Channelside) LLC to purchase from Poseidon up to 25 million gallons of water per day 10 (MGD) of product water, subject to the terms, conditions and arrangements included in 11 the Agreement; and 12 13 WHEREAS, the completion of certain events is required by September 28, 2006 14 by the terms and conditions of section 2.3.1 of the Agreement; and WHEREAS, if the events described in section 2.3.1 are not completed by 16 September 28, 2006, either party may exercise its right to terminate the Agreement; and 17 WHEREAS, both parties desire to allow a short extension of the deadline 18 established in section 2.3.1 of the Agreement to allow the completion of negotiations 19 regarding completion of those certain events described in section 2.3.1. 20 21 NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the 22 Carlsbad Municipal Water District, as follows: 23 1. That the above recitations are true and correct. 24 2. That the Board of the Carlsbad Municipal Water District hereby authorize the Chairman of the Board to execute the Second Amendment. /// 27 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a Special Meeting of the Board of Directors of the Carlsbad Municipal Water District of the City of Carlsbad on the 26th day of September, 2006, by the following vote: AYES: Board Members Lewis, Hall, Kulchin, Packard Sigafoose NOES: None ABSENT: None ATTEST: Loiflvzfe; LORRAINE M. WOOD, Secretary (SEAL) EXHIBIT 2 SECOND AMENDMENT TO WATER PURCHASE AGREEMENT THIS SECOND AMENDMENT TO WATER PURCHASE AGREEMENT (this "Amendment1), dated as of September^, 2006, is made by and between the CARLSBAD MUNICIPAL WATER DISTRICT, a municipal water district (the "District"), and POSEIDON RESOURCES (CHANNELSIDE) LLC, a Delaware limited liability company ("Poseidon"). RECITALS WHEREAS, the District and Poseidon previously entered into that certain Water Purchase Agreement (the "Purchase Agreement"), dated as of September 28, 2004; and WHEREAS, the District and Poseidon previously entered into that certain Amendment to Water Purchase Agreement (the "First Amendment"), dated as of May 19, 2005; and WHEREAS, the Purchase Agreement and the First Amendment sometimes hereinafter are referred to collectively as the "Agreement"; and WHEREAS, capitalized terms that are used in this Amendment without definition and that are defined in the Agreement are used herein as so defined; and WHEREAS, pursuant to the terms of the Agreement, Poseidon has agreed to sell to the District, and the District has agreed to purchase from Poseidon, up to twenty-five (25) MOD of Product Water, subject to the terms, conditions and arrangements set forth in the Agreement; and WHEREAS, pursuant to Section 2.3 of the Agreement, either Party has the right to terminate the Agreement if certain events have not occurred on or before the Determination Date; and WHEREAS, Section 2.3 of the Agreement provides that the Determination Date may be extended by the mutual agreement of the Parties, and the District and Poseidon desire to extend the Determination Date as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by the Parties hereto, the Parties covenant and agree as follows: 1. Amendment. The Determination Date is hereby extended to November 30, 2006, and after the execution of this Amendment by each of the Parties hereto, all references in the Agreement to the Determination Date shall mean and refer to November 30, 2006. 2. Controlling Law. This Amendment shall be governed by the laws of the State of California in accordance with Section 21.5 of the Agreement. 3. Counterparts and Facsimile Signatures. This Amendment may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute one and the same instrument. The signature page of any counterpart may be detached therefrom without impairing the legal effect of the signature(s) thereon, provided such signature page is attached to any other counterpart identical thereto except for having an additional signature page executed by any Party. Each Party agrees that each other Party may rely upon the facsimile signature of each other Party on this Amendment as constituting a duly authorized, irrevocable, actual, current delivery of this Amendment as fully as if this Amendment contained the original ink signature of the Party supplying a facsimile signature. 4. Amendment and Modification Only. The Parties hereby ratify and confirm all of their obligations under the provisions of the Agreement as amended by this Amendment, and except as amended by this Amendment, all of the terms and conditions of the Agreement shall remain unmodified and in full force and effect. IN WITNESS WHEREOF, the District and Poseidon, intending to be legally bound by the provisions herein contained, have executed this Amendment effective as of the date first above written. CARLSBAD MUNICIPAL WATER DISTRICT Na Title: President POSEIDON RESOURCES (CHANNELSIDE) LLC By: J Title: Approved as to Form By: onald KTBall City Attorney