Water-short California's search to satisfy its thirst is beginning to focus on a controversial source -- the Pacific Ocean.
In November, Connecticut-based Poseidon Resources Corp. won a key regulatory approval to build a $300 million water-desalination plant in Carlsbad, north of San Diego. The facility would be the largest in the Western Hemisphere, producing 50 million gallons of drinking water a day, enough to supply about 100,000 homes.

Taking the salt out of seawater is a common way to produce drinking water in the Middle East and in other arid regions. World-wide, 13,080 desalination plants produce more than 12 billion gallons of water a day, according to the International Desalination Association.

But it has been less successful in the U.S. Desalination is more expensive than traditional sources, and critics say it harms the ocean. In 1992, Santa Barbara, Calif., shuttered a small plant after three months when rain replenished the county's main water sources. At a plant near Tampa, Fla., that Poseidon was also involved in, technical glitches increased the water's cost and, when it opened in 2003, initially limited output to less than a third of the projected 25 million gallons a day.

Southern California water officials say conditions have changed. Improved technology has cut the cost of desalination in half in the past decade, making it more competitive. And traditional water supplies, such as the Colorado River and snow-melt runoff, are becoming less reliable because of population growth and environmental restrictions.

"We have to get our water from somewhere, and it's going to be the Pacific Ocean," says Gary Arant, manager of the Valley Center Municipal Water District, which serves farms and homes around San Diego. His district has agreed to buy almost 15% of the Carlsbad plant's output. Poseidon says it has signed 30-year contracts with nine local water districts to sell all the water; about 40% would go to the city of Carlsbad.

The project has attracted big financial partners. In May, General Electric Co. said it had invested in it and would provide filtration technology. In September, Citigroup Inc.'s sustainable-development-investments unit became the lead investor in closely held Poseidon, formed in 1995 by former GE executives and private-equity firm Warburg Pincus. Andrew de Pass, the Citigroup unit's managing director, says the need for long-term water sources drove the investment. He declined to specify how much Citigroup invested.

Poseidon hopes to break ground this year and deliver water no later than 2011, providing it wins approval for its plans to mitigate the plant's impact on marine life and to offset its carbon-dioxide emissions.

The plant would initially take the saltwater discharged from an adjacent power plant that uses it for cooling, and later take water directly from the Pacific. Two sets of filters purify the water. The first set, thin tubes resembling rows of angel-hair pasta, blocks relatively large particles. The seawater is then pumped at very high pressure through dense membranes to remove salt, in a process called reverse osmosis.

This process uses a lot of electricity, contributing to its big price tag. Poseidon plans to sell the water for about $950 per acre-foot. That compares with an average $700 an acre-foot that local agencies now pay for water. (An acre-foot is 325,851 gallons, enough water for four people a year.) The Metropolitan Water District, a wholesale supplier to 18 million Southern Californians, will subsidize the difference as a way to add new water sources to the region. Poseidon President Walter Winrow says Poseidon will raise its price as local agencies pay more for water from other sources.

Peter Gleick, head of environmental think-tank Pacific Institute, says the costs of desalination projects tend to increase from those projected by sponsors, because of energy expenses and environmental requirements. "What people claim is always a little different," says Mr. Gleick.
There are other obstacles. California coastal regulators and some environmentalists say desalination uses too much energy and kills fish when the water is processed. Two environmental groups Monday filed suit to block the plant, on the grounds that it will harm marine life. Peter MacLaggan, who oversees the Carlsbad project for Poseidon, says the plant would kill about two pounds of fish a day, or "less than the daily consumption of one pelican."