IV. Lead Agency Designation

In order for this Commission to reach a conclusion about whether it is properly designated as the lead agency for CEQA purposes, the ALJ directed Cal-Am to file additional information identifying all of the affected jurisdictions and permits required for the Coastal Water Project, and providing notice to those entities. Cal-Am complied with this ruling. The various filings identify as many as 28 state, federal, county, local and other agencies with potential permitting authority over the Coastal Water Project.

The ALJ also allowed any interested entity to file comments on Cal-Am's motion regarding Lead Agency designation. In response, four entities submitted comments expressing the belief that they, or other agencies, rather than the Commission would be the appropriate lead agency under CEQA for the Coastal Water Project. Only two, apart from the Commission, are suggested as potential lead agencies. Specifically, Monterey County ("the County") and the Monterey County Water Resources Agency ("MCWRA") assert that the County should assume the role of lead agency in cooperation with the MCWRA. The Marina Coast Water District (MCWD) supports the County in cooperation with MCWRA as lead agency. The Monterey Peninsula Water Management District (District) asserts that it should assume the role of lead agency, and the Citizens for Alternative Water Solutions (CAWS) support the District as lead agency.

Below we consider the role of the named potential agencies under CEQA's criteria for lead agency status, and evaluate whether the Commission should act as lead agency under CEQA for environmental review of the Coastal Water Project.

A. Legal Standard for Determining Lead Agency

Under CEQA, where the project is to be carried out by nongovernmental entities, the lead agency will normally be the public agency "with the greatest responsibility for supervising or approving the project as a whole." (Cal. Code Regs., tit. 14 § 15051(b).) Usually, this is the agency with the broadest governmental powers. (Cal. Code Regs., tit., 14, § 15051(b)(1).) However, where two or more public agencies have relatively equal responsibility, "the lead agency which will act first on the project in question shall be the lead agency." (Cal Code Regs., tit., 14 § 15051(c).) This is consistent with the legislative goal of assuring environmental impact assessment in governmental planning at the earliest possible time. (Citizens Task Force on Sohio v. Board of Harbor Comrs. (1979) 23 Cal.3d 812, 814.) Where the identity of the lead agency cannot be determined by the foregoing criteria, the possible candidates may simply agree among themselves which will be the lead agency. (Cal. Code Regs., tit., 14, § 15051(d).) Where two or more public agencies cannot resolve which agency should act as the lead agency, the dispute may be submitted to the Office of Planning and Research for resolution. (Cal. Code Regs., tit., 14, § 15023, 15053, and 16012 et seq.)

Relevant case law instructs that the roles of the various agencies should be evaluated in the context of the scope of the project in question. (City of Sacramento v. State Water Resources Control Board (1992) 2 Cal.App.4th 960.) The project is generally considered to be "the whole of an action, which has a potential for resulting in a physical change in the environment..." (Cal. Code Regs., tit., 14, § 15378(a).) The project is "the activity which is being approved and which may be subject to several discretionary approvals by governmental agencies. The term `project' does not mean each separate governmental approval." (Cal. Code Regs., tit., 14, § 15378(c), City of Sacramento, supra.)

B. Role of Monterey Peninsula Water Management District

The District states it should be the lead agency for the Coastal Water Project because it has extensive and refined expertise regarding Monterey Bay Area water supply options, constraints, and impacts. Much of this has been gained through its role as lead agency under CEQA for Cal-Am's application for permit of the Carmel River Dam and Reservoir Project. The District references its prior development of data relating to reservoir alternatives and desalination plants. The District contends that since it plans to pursue its own Sand City desalination plant project and act as lead agency for that project, it would be confusing, inefficient, and possibly conflicting to produce separate environmental analyses. Further, the District states that it is the primary public agency with regulatory control over Cal-Am's water systems operations, and the aquifer storage and recovery component of the project would be constructed and operated entirely within the District.

CAWS supports the District primarily on the basis of the District's prior experience in evaluating the relevant environmental issues, as compared to the Commission, which it says has no such expertise, and the County, which it says has erred in its management of County water resources and prior water supply projects. CAWS states that the District will have the major management task after the project is complete.

The County provides examples of the District's limited role in relation to the Coastal Water Project and contends that the District is not qualified to act as the lead agency under CEQA's criteria. In particular, District territory is specific to the Monterey Peninsula and adjacent Carmel Valley. The majority of the proposed Coastal Water Project facilities are not located within the District's boundaries or permitting authority. In addition, the District has only limited jurisdiction over water resources because it manages those resources for only a segment of the County population. It is the MCWRA that has the responsibility and jurisdiction to manage water resources throughout the entire County.

The County also points out that under a Memorandum of Understanding, the District must obtain the written consent of the MCWRA before undertaking any project in the County of Monterey which is wholly or partially outside the District's boundaries, including the use of water resources located outside those boundaries.

We believe the District possesses valuable knowledge and experience in evaluating relevant environmental issues in the Monterey area. We also do not question that the Coastal Water Project will require Cal-Am to obtain certain permit approvals for the project from the District. However, qualification as a lead agency is contingent upon the agency's overall responsibility in relation to the whole of the project activities. Because many of the proposed project facilities fall outside the District's jurisdictional boundaries and authority, it follows that the District is not the agency with "the greatest responsibility for supervising or approving the project as a whole." Accordingly, we find that CEQA's criteria do not support the District as lead agency for the Coastal Water Project.

C. Role of Monterey County and the Monterey County Water Resources Agency

The County states that it, in coordination with the MCWRA, should act as lead agency for the Coastal Water Project because it has the general governmental powers and responsibility to implement land use regulations applicable to the project, it is uniquely capable of analyzing local and regional environmental impacts of the project, and represents the community most affected by the project. The County acknowledges the MCWRA has responsibility and jurisdiction to manage water resources throughout the County, but states that because MCWRA would work together with the County, it makes sense for the County to be lead agency.

The County goes on to explain the scope of its responsibilities related to the proposed project. It states that it has permitting authority over the proposed desalination plant location, which is subject to its "plenary authority." Specifically, development on the property is governed by a North County Land Use Plan as certified by the Coastal Commission in 1982 as part of the County's Local Coastal Program. A County Coastal Development Permit is required for any portion of a project within the Land Use Plan that is not within the retained jurisdiction of the Coastal Commission. The Coastal Commission retains original permitting authority over development on tidelands, submerged lands, or on public trust lands. The Coastal Commission delegated authority to the County regarding development on unincorporated coastal areas of the County. The County states that the desalination plant, associated pipelines, and the Seaside Basin storage and recovery facilities are either in the unincorporated areas or outside the retained jurisdiction of the Coastal Commission. The County also refers to Monterey County regulations specifically governing "desalination treatment facilities" and requiring County authorization for the construction and operation of those facilities.

In support of the County, MCWD states that the proposed Moss Landing desalination plant site is a valuable regional resource and that good stewardship will require the cooperation and oversight by regional entities. MCWD states that as the provider of water and wastewater services to the Marina and Ord Community, it has authority to build a desalination plant at Moss Landing, and has experience doing so at Marina. MCWD does not assert that it should be lead agency for the Coastal Water Project, rather it says as between the County and the Commission, the County has the greatest responsibility for approving the project as a whole.

The County has demonstrated that it, particularly in combination with the MCWRA, has jurisdictional responsibilities covering land use implementation and development, management of water resources, and facility construction and operation. We agree that this broad scope of jurisdiction, permitting authority, and oversight responsibility for the project as a whole are consistent with CEQA's lead agency criteria.

D. Role of California Public Utilities Commission

Cal-Am reasons that the Commission should act as lead agency because the Coastal Water Project is a multi-jurisdictional project, and among the various federal, state, county, municipal and other agencies with permitting authority, only the Commission is a statewide public agency with broad jurisdiction. Cal-Am states that the Commission has general governmental oversight and responsibility for the project as a whole, must issue a CPCN for the project, and has a legal obligation and ability to resolve issues relating to the costs and ratepayer impacts of the Coastal Water Project or project alternatives.

The Commission is a constitutionally established agency charged with responsibility for regulating public utilities within the State of California. The Legislature has specifically provided that "Private corporations and persons that own, operate, control, or manage a...system for the...furnishing of...water...are public utilities subject to control by the Legislature." (Cal. Const., Article XII, Section 3.) Pursuant to the grant of authority found in Article XII, Section 2 of the California Constitution, the Commission may, "[s]ubject to statute and due process...establish its own procedures."

As a regulatory body designed to "protect the people of the state from the consequences of destructive competition and monopoly in the public service industries" (Sale v. Railroad Comm. (1940) 15 Cal. 2d 612, 617), the Legislature has extended to this Commission broad, general powers to regulate public utilities as well as specific authority to act to promote the health and safety of the public. In particular, the Commission has jurisdiction to regulate the service of water utilities with respect to the health and safety of that service (Pub. Util. Code §§ 451, 761, 739.8, 768, 770(b)); the Commission has concurrent jurisdiction with the State Department of Health Services over the quality of drinking water provided by regulated water utilities (Pub. Util. Code § 770 and Health and Safety Code Section 116465); and the Commission has the power and obligation to determine that any rate is just and reasonable. (Pub. Util. Code §§ 451, 454.) Additionally, the Legislature has conferred upon the Commission the authority to "supervise and regulate every public utility in the State and [to] do all things which are necessary and convenient in the exercise of such power and jurisdiction." (Pub. Util. Code § 701.)

No party contends that the Commission does not possess, generally, the nature of regulatory authority that would justify acting as Lead Agency. The Commission regularly acts in the role of CEQA Lead Agency for proposed utility projects and we believe we could do so here. However, determining the appropriate CEQA role for this agency should be evaluated based on the scope of our responsibility for supervising or approving the Coastal Water Project as a whole, particularly in relation to that of the County and the MCWRA.

We recognize that County (in combination with MCWRA) has responsibility and jurisdiction over, and the closest nexus with, a range of practical project issues involving land use implementation, water resource management, development, construction and operation. MCWRA has the authority to manage and protect water supply quality and quantity in Monterey County.

Nevertheless, CEQA's lead agency criteria look to "the agency with the broadest governmental powers." (Cal. Code Regs., tit., 14 § 150511(b)(1).) We believe that the above stated provisions enumerating this Commission's broad, and specific, statewide authority and responsibility to regulate public utility water companies require that we should assume lead agency status to conduct environmental review of the Coastal Water Project under CEQA. However, in expressing our intent to undertake this task, we believe efficient and effective environmental review will require extensive involvement by virtually all the responsible agencies with permit authority over the Coastal Water Project, and will particularly require drawing upon the knowledge and expertise of the District, the County and MCWRA. We take this opportunity to express our intent to undertake that close coordination and encourage their full and active participation in the CEQA process.