2. Background

For the most part, the facts in this case are not in dispute.

Pacific Fiber Link, L.L.C. (PFL)¹ was formed in February 1998 with the aim of building a fiber optic telecommunications system between Seattle, Washington, and Portland, Oregon. Depending on the success of that project, PFL intended to continue construction of the system into California, first extending from Portland to Sacramento and, later, to San Diego.

In April 1998, an attorney for PFL spoke by telephone to Commission staff and was advised that PFL could obtain operating authority in California by using a simplified registration process. The registration process was available at that time to long distance carriers that were designated as non-dominant interexchange carriers, or NDIECs. On June 17, 1998, PFL filed under the registration process for a certificate of public convenience and necessity. On July 20, 1998, PFL was authorized by this Commission to conduct long distance telecommunications service in California as an NDIEC. (Decision (D.) 98-07-057.) PFL did not as part of the registration process seek Commission review for compliance with the state's environmental protection act.

Unlike the great majority of new long distance entrants, PFL did not intend to use the facilities of other companies to purchase and resell service to consumers. Instead, it intended to construct a fiber optic telecommunications system along the West Coast. It then would lease or sell portions of its fiber optic capacity to other companies.

Accordingly, PFL in 1998 began assembling the local permits it would require to construct a trench along roadside rights-of-way in which to install its conduit and fiber optic cable between Portland and Sacramento. When local authorities began to inquire about PFL's CEQA compliance, PFL in September 1998 called Commission staff to ask about CEQA review. PFL was advised that the Commission had no procedure in place (at that time) for CEQA review of NDIEC applications. PFL was advised that a "batch CEQA review" was available for carriers seeking to provide competitive local carrier (CLC) service, but PFL was not eligible for this process because it did not seek CLC authority. The batch CEQA review was later discontinued in favor of case-by-case review.

Communications between PFL and the Commission's CEQA staff continued through September and October 1998, with no resolution of how PFL was to proceed under CEQA.

In early October 1998, PFL retained the services of Foster Wheeler Environmental Corporation to establish environmental rules for the planned construction and to prepare the reports that would be required for formal CEQA review. On October 15, 1998, PFL met with the Commission's CEQA staff and was advised that staff was still exploring options for conducting an environmental review of the project.

In November 1998, PFL notified the Commission's CEQA staff that PFL had obtained all necessary local permits for construction in Yolo County, California, including a Yolo County notice of exemption from CEQA requirements. PFL stated that it would begin construction in Yolo County after the Thanksgiving holiday unless the Commission directed it not to do so. At hearing, a Commission staff member testified that while he recommended that PFL wait for formal Commission action, he (the staff member) stated that he would not tell PFL not to proceed.

On December 2, 1998, PFL began trenching and installing its fiber optic cable in Yolo County. By the end of the month, it had completed 14.6 miles of installation. As part of the work, PFL also installed conduit for Yolo County's 911 telephone system without charge to the county.

On December 14, 1998, PFL by telephone notified the Commission's CEQA staff of the progress of construction and requested an in-person meeting to determine how to obtain formal CEQA approval. A meeting date was set for December 29, 1998. On December 28, 1998, PFL was advised by staff that the Commission was reviewing the matter internally, that a ruling addressing environmental review for NDIEC applicants was being considered, and that an in-person meeting therefore was premature. The meeting later was rescheduled for February 16, 1999.

PFL and the Commission's staff continued to communicate by telephone in January 1999. At hearing, a CEQA staff member testified that he had made calls on PFL's behalf to agencies in four counties to tell them that the company and the Commission were working together to try to resolve the environmental review question. Meanwhile, work on the fiber optic project continued. By the end of January, 22.65 miles of conduit construction had been completed in Yolo and Sutter counties.

On February 16, 1999, the CEQA staff met with representatives of PFL and its environmental consultant. PFL outlined the progress of its construction and provided the environmental reports that had been conducted in Yolo, Sutter and Butte counties. PFL stated that it had adopted numerous mitigation measures to avoid interference with sensitive biological resources. The Commission's chief CEQA officer was asked whether PFL could continue construction, and he replied "Yes. You can continue doing what you have been doing." (Transcript, at 496.) At hearing, the officer stated that his response addressed continuation of the mitigation measures rather than the construction that was under way.

The Commission's CEQA staff and PFL representatives continued to communicate by telephone in March and April 1999, and during that time PFL completed 90.8 miles of construction of its project. By April, the parties had agreed that PFL should prepare a Proponent's Environmental Assessment as the first step in formal CEQA review. A proposed outline of the assessment was delivered to the Commission on April 13, 1999, by PFL's environmental consultant.

By May 1999, the Commission had retained Entrix, Inc., to conduct an initial study of the PFL project under CEQA guidelines. The Entrix team in June conducted a four-day field examination of completed and proposed work on the PFL construction route. On June 17, 1999, a project review meeting was conducted at the Commission, and PFL was advised to file a petition to modify the operating authority that had been granted a year earlier to include environmental review and approval.

By letter dated June 25, 1999, the California Department of Fish and Game asked the Commission to issue a stop-work order on PFL's project "until proper project review and approval has been completed and appropriate environmental protections are in place." (Exhibit 13.) A stop-work order was issued by the Commission's Executive Director on July 6, 1999, at which time PFL ceased all construction. A total of 131 miles of conduit construction had been completed at that time.