Thank you for your question in regard to a recent column.
You are asking me to prove that there are no public funds being used for the Poseidon project. You are a pretty smart guy and must know that it is philosophically impossible to prove a negative. If you are making the claim that public funds are being used, then it is you who should do the proving.
I will advise that no municipal bonds are being used and that the project is not being subsidised. If you are able to prove that public funds are being used, your other readers and I would be very interested in the details.
One area frequently misconstrued as public funding is the subsity given as an incentive to MWD, not Poseidon.
Further, Poseidon in Carlsbad issued tax free bonds, but as you know these are not public funds.
You indicate that you will have other questions regarding this column. While I always respond to reader questions, I have no thirst for an ongoing dialogue on this column or any other column. I write 52 a year and can’t keep dwelling on one over another.
Thank you again for reading my column and taking the time to write.
In your recent column in the Orange County Register (Reject Huntington desal myths), you purport to describe and refute several myths made by opponents to Poseidon Resources Inc., a multinational water privatization company that proposes to build a desalination plant roughly at the corner of Newland Avenue and Pacific Coast Highway in the southeast portion of Huntington Beach, California.
Poseidon Resources and its supporters say the plant would provide a vital addition to the city’s water portfolio in response to the state’s alleged water shortage–a “green” and “drought free” source of drinking water provided to the citizens of Huntington Beach and Orange County at competitive rates.
Poseidon and its supporters have always claimed that its desalination plant would be built and operated purely as a privately run, non government-subsidized operation–all done at no risk to taxpayers–and the epitome of the free market.
But, in fact, documents which I have quoted at length in previous articles I wrote have shown that Poseidon is relying on public financing for the viability of both of its proposed southern California desalination plants.
Poseidon’s thirst for public funds has never been a secret.
Although former Poseidon representative Billy Owens tried to convince the Huntington Beach city council in 2006 that it was not seeking a government handout for its Carlsbad plant by saying that the money would only be for shipping water–all for the benefit of the people, not to help Poseidon in any way, everyone who closely followed the facts, including city council members, knew that there is no way Poseidon could offer water at $800 per acre-foot as promised without subsidies. Actually, the water it would produce in Huntington Beach will likely cost ratepayers between $2,000 and $3,000, as much as six times the cost of even imported water, but more about that later.
But despite the smokescreen, Poseidon has long been on record as requesting, if not demanding, government subsidies.
In fact, the Metropolitan Water District of Los Angeles County recently voted to provide a $350 million subsidy that, technically, goes to the San Diego Water Authority to help offset the increased costs of water, but which will directly benefit Poseidon and its Carlsbad plant by helping to make it cost effective and viable to investors. Poseidon’s officers pleaded desperately for that government handout because, they said, they could not finance their project without it–you can see them plead and whine on video at www.surfcityvoice.com).
As for the Huntington Beach plant, there is a Memo of Understanding between Poseidon and the Municipal Water District of Orange County confirming that, if the Huntington Beach project goes through, MWDOC will receive a $350 million subsidy to offset the higher costs of desalinated water Poseidon will produce. Poseidon Resources is also counting on that money, according to its own words in a letter to the California Coastal Commission, referred to in my article, Desal Bailout.
So, I was wondering where you came up with the bold statement that there will be no public financing of the Huntington Beach desalination plant?
What else would you call $350 million designated as part of Poseidon’s 30 year contract with MWDOC if not a government, taxpayer funded, handout to private enterprise?
And there very well could be much more public financing for each plant than that, but let’s start with your response to the $350 million grants.
To assist you in your future research, I have republished some articles I wrote previously on the financing issues regarding Poseidon. You can read them here:
Poseidon Resources Inc., a multinational water entrepreneur, wants to build desalination plants in the cities of Huntington Beach and Carlsbad in California. Desalination is the most energy intensive and costly source of drinking water and Poseidon always said that their projects would be funded completely with private sector dollars. Local elected officials bought into that, but it was obvious from the start that these two projects would need public funding to exist. In fact, if these projects go through, they will each receive a minimum of $350 in government subsidies, and possibly much more. Here is the story.
Editor’s note: Unfortunately, due to a technical problem, the aspect ratio of the video is incorrect and images appear taller than they should. The Surf City Voice apologizes for the inconvenience. Efforts are underway to correct the problem.
Originally published March 17, 2009 as part1 of a three part series on desalination.
Poseidon Resources Inc. and the four Huntington Beach city council members who voted in 2006 to approve the company’s request to build a desalination plant in the city’s southeast section promised that the project would be paid for with private funds-at no cost to the city’s taxpayers.
But Poseidon, a multi-national equity investor and developer of privatized water systems, currently controlled by “zombie” bank, Citigroup (which is being bailed out by federal tax funds), could directly and indirectly benefit from $1 billion in public funds, about 70 percent of that courtesy of taxpayers in Los Angeles, Orange and San Diego counties and the rest paid for by taxpayers across America through the American Recovery and Reinvestment Act (ARRA) signed into law recently by President Barack Obama.
The subsidies would also be directed at a nearly identical Poseidon desalination plant in the city of Carlsbad and would help ensure but not guarantee that both plants are cost effective for Poseidon to build and to operate. Under the city approved plan, Poseidon would build the desalination plant in Huntington Beach next to the AES power generating station at Beach and Newland streets. Poseidon’s plant would suck in 127 million gallons of seawater per day through existing AES cooling pipes to create 50 million gallons of per day or 56,000 acre feet of drinking water each year.
Poseidon would sell 3.2 million gallons of converted seawater per day to the city, a small fraction of its total daily water usage from other source, at five percent less than it pays the Municipal Water District of Orange County (MWDOC) for water. The other 47.8 million gallons per day would go to MWDOC’s member districts at government subsidized prices. Jobs would be created by the building and operation of the plant and the city’s tax base would go up, according to predictions made by Poseidon and city staff.
Councilmember Don Hansen summed up the council majority’s view three years ago when he reassured hundreds of city residents packed into the council chambers that the desalination plant was “born purely on private investment dollars” to be spent at Poseidon’s risk, not the taxpayers’. Continue reading Desal Bailout?→
Originally published March 18, 2009. Part II of a three part series.
Huntington Beach City Councilmember Don Hansen reassured the public. “I’m actually pretty comfortable having a private company potentially evaluate the dedication of a source for our future water supply,” he said.
That was three years ago at a city council meeting when Hansen and three other council members, Cathy Green, Gil Coerper and Keith Bohr (now Mayor Bohr) voted to allow Poseidon Resources Inc. to build a desalination plant at the corner of Newland and Beach avenues in southeast Huntington Beach.
If all goes according to plan, the facility would convert 127 million gallons of seawater into 50 million gallons of fresh drinking water every day of the year. The city would have the option of buying up to 3.5 million gallons of that water at a discount compared to the cost of imported water (two-thirds of the city’s water comes from ground wells, its cheapest source of water). The rest would be distributed throughout the Municipal Water District of Orange County (MWDOC), in theory, to provide a guaranteed water source to help offset drought conditions in the state.
The plant still needs approval from the State Lands Commission and the California Coastal Commission and Poseidon still lacks the private and public financing needed to build and operate, although Poseidon officials say that all are forthcoming (see Part 1). Continue reading Desal Debacle: What if Poseidon fails again?→
Part III of a series. Originally published May 5, 2009
Poseidon Resources Inc.’s website claims that the desalination plant it wants to build in southeast Huntington Beach, at Newland and Beach avenues, will be a “cost-effective solution to provide residents with a safe and reliable water supply by using existing structures—at no cost to taxpayers.”
Elected officials who voted to approve the desalination plant three years ago have consistently echoed Poseidon’s claim: Poseidon would privately own and operate the plant for its own profit and for its investors—a strictly free market affair with no taxpayer investment or risk, they said.
City council representative Don Hansen praised the project’s supposed free market values to a crowded city council chamber before he gave Poseidon his vote along with three other council members, Keith Bohr, Gil Coerper and Cathy Green.
“My belief is that the market is going to drive the majority of these decisions. I truly believe that,” Hansen said.
If the Poseidon desalination plant is not profitable, he added, it “will never see the light of day. And it’s purely born on private investment dollars, the risk that they [Poseidon] are going to take.”
In a candidates’ debate last year, Hansen warned that “We’re going to need the water” and reassured again that “It’s not us building the plant. It’s all private investment.”
If all goes well for Poseidon, its Huntington Beach plant will produce 50 million gallons of drinking water per day by sometime in 2011. It still needs to obtain additional government permits and must work out a franchise agreement with the city first.
Poseidon plans to build an almost identical desalination plant in the city of Carlsbad. That project is further along in the permit process and if financing comes through it could start construction this summer. Poseidon’s CEOs dream of building large desalination plants at other California coastal locations as well.
Hansen’s appeal to the free market instincts of the voters is persuasive in a city where the call for smaller government is almost a religious doctrine. But attributing either Poseidon project to to free-market karma is misleading because the company could benefit from as much as $1 billion in taxpayer supplied subsidies that would make it easier for Poseidon to attract the private sector financing that it also needs but still lacks in order to build and operate the two plants. Continue reading ‘No Cost’ Desal Costs A Lot: How your tax dollars created the desalination industry→