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LIMITED TERM PARTIAL BASIN EQUITY ASSESSMENT EXEMPTION AGREEMENT BETWEEN ORANGE COUNTY WATER DISTRICT AND CITY OF SANTA ANA (Santa Ana Well No. 32) This LIMITED TERM PARTIAL BASIN EQUITY ASSESSMENT EXEMPTION AGREEMENT (the "Agreement ") is entered as of January _, 2015 by and between the ORANGE COUNTY WATER DISTRICT, a special governmental district organized and existing pursuant to the Orange County Water District Act, Chapter 924, Statutes of 1933, as amended ( "OCWD "), and the CITY OF SANTA ANA, a municipal corporation organized and existing under the laws of the State of California ( "City "). RECITALS A. Approximately two - thirds of all drinking water currently used within northern and central Orange County is provided from groundwater by OCWD. Inasmuch as Orange County is located in a semi -arid area, it is essential that all reasonable efforts be put forth to protect the quality of groundwater supplies and to provide for maximum utilization of that resource. B. The United States Environmental Protection Agency ( "USEPA ") and the State of California Department of Public Health ( "CDPH ") have adopted primary drinking water standards, which include limits for nitrate. Water containing nitrate concentrations in excess of 45 mgL (expressed as NO3) have been determined by USEPA and CDPH not to be suitable for municipal or domestic purposes without treatment. C. The City operates a public water system for the purpose of delivering potable water to its customers, and obtains most of its water by pumping groundwater from wells for delivery to its customers. The City, as well as other groundwater producers within the boundaries of OCWD, has lost the use of some of its groundwater wells due to the presence of nitrate in quantities exceeding USEPA and CDPH drinking water standards. Santa Ana Well No. 32 ( "Well 32 "), located at Morrison Park near the intersection of Memory Lane and Westwood Avenue in Santa Ana, has the capacity to produce up to 4,000 acre feet per year of groundwater; however, the City has discontinued production of groundwater from Well 32 in 2005 due to its low operational efficiencies and high nitrate concentrations. D. The City recently retained an engineering consulting firm to evaluate and recommend alternatives to reduce high nitrate levels in the water produced by Well 32. After evaluating alternatives, the City has decided to pursue a water blending alternative as the most economical option. The City proposes to blend high nitrate water produced by Well 32 with low nitrate water produced by City of Santa Ana Wells 36 and 39 ( "Wells 36 and 39 ")in the reservoirs located at the John Garthe Pump Station Complex. The blending alternative mitigates the high nitrate levels and allows the City to utilize the groundwater pumping capacity of Well 32 and place the well back in to service (the "Project "). The City's preliminary cost estimate for the Project is $4,600,000 which includes $920,000 in contingencies (the "Project Cost"). The City and OCWD will revisit the Project Costs once the construction bids are received to ensure the program financials are consistent with this Agreement. OCWD has determined that the City's Exhibit 1 130022499 -0003 2.1 a03/29 84874 /l2 251-5 848745.1