4. Position of CSD

CSD argues that sanctions are warranted against PFL for using the registration process instead of an application for authority to operate, and for starting construction of its fiber optic project before obtaining CEQA approval. CSD investigator Stephanie Amato testified that, regardless of conflicting advice that PFL may have received from Commission staff members, PFL knew or should have known that it was not eligible to use the simplified registration process to register as a facilities-based NDIEC in California.

Amato testified that the instructions for the registration process state:

"Only facilities which meet the requirements for exemption from the California Environmental Quality Act (CEQA) pursuant to Commission Rules of Practice and Procedure 17.1(h)(1)(A)(1) may be included in a CPCN registration. All other facilities will require a formal application."" (Exhibit 1, at 4.)

Amato testified that this instruction is on the Telecommunications Division webpage and is printed out along with the two-page registration form. The rule also is stated in the Commission decision establishing the registration process. (Re Simplified Registration Process for Nondominant Telecommunications Firms (1997) D.97-06-107, 73 CPUC2d 288, 298.) The referenced Rule 17.1(h)(1)(A)(1) provides an exemption only for restoration and repair of existing structures where the damage is not substantial, an exemption not applicable to PFL.

According to CSD, PFL should have known that it was ineligible to use the simplified registration procedure and therefore was required by Rule 17.1 to file a formal application with an accompanying Proponent's Environmental Assessment (Rule 17.1(c) and (d)).

CSD also presented the testimony of three Commission staff members who had dealt with PFL: Joseph McIlvain, regulatory analyst responsible at the time for dealing with NDIEC applications; John Boccio, regulatory analyst in the Environmental Projects Unit of the Commission's Energy Division; and Andrew Barnsdale, environmental programs manager.

McIlvain testified that he receives hundreds of calls from telephone company representatives and he did not recall details of calls from PFL representatives in 1998. On cross-examination, however, he stated that the Commission in 1998 did not do CEQA reviews for applicants seeking only NDIEC authority, and he was likely to have advised callers to check the Commission's web site and use the simplified registration form. McIlvain said that the policy changed in 1999, and he began telling "facilities-based" NDIEC applicants that they would have to file an application and comply with CEQA requirements. Facilities-based carriers are those that plan to construct their own facilities rather than use the facilities of other telephone companies. McIlvain said that only about 20 or 30 of the 738 NDIECs registered with the Commission in January 2000 were facilities-based.

Boccio testified that he had many conversations in 1998 with Anita Taff-Rice, an attorney for PFL. He said that he told her that CEQA review for facilities-based long distance carriers was a "gray area," and no definitive policy was in place at that time. He said that Taff-Rice argued that the authority already granted to PFL should be sufficient to permit construction in roadside rights-of-way. Boccio further testified that he and Barnsdale counseled PFL not to begin construction until the CEQA question was resolved.

On cross-examination, Boccio stated that the CEQA unit in 1998 dealt primarily with energy utilities, and PFL was the first NDIEC telephone applicant to seek CEQA review. He stated that he had explored many options for handling the matter administratively, including the use of the "batch processing" review that was in place for competitive local carriers. (The batch processing of CLC applicants with construction plans took place on a quarterly basis and involved a blanket mitigated negative declaration for all of the carriers. This process was discontinued in 1999 and replaced with a case-by-case review of applicants.) Boccio testified that he worked cooperatively with PFL trying to resolve the CEQA question, and that he made a number of phone calls on PFL's behalf to other agencies.

Like Boccio, Barnsdale testified that PFL's CEQA status was a case of first impression for his unit in 1998. He said that PFL's decision to begin construction on December 6, 1998, was done at the company's initiative and at its own risk. On cross-examination, he acknowledged that incumbents like Pacific Bell, AT&T and cellular carriers are not subject to CEQA review for new facilities construction for various reasons, including claims of exemption, and that differing degrees of CEQA oversight applied in 1998 to new entrants in the telecommunications market depending on the type of service they planned to offer.

In testimony on behalf of the California Department of Fish and Game, James R. Nelson, described his investigation as a conservation supervisor of PFL's trenching in state park areas. He stated that PFL had begun directional drilling and installation of conduit under parkland streams without obtaining streambed alteration agreements from the department. Nelson stated that PFL's permit coordinator told him that the company had completed CEQA review as part of the authority granted by the Commission, a statement that Nelson determined was untrue. Nelson testified that he was particularly concerned with PFL's failure to clean up spills of betonite, a clay-like drilling substance that in large quantities can adversely affect fish and aquatic organisms. While the Fish and Game Department eventually entered into an agreement with PFL for its drilling operations, Nelson and his manager reported their concerns about the CEQA status of the project to the Commission in June 1999. The Commission's stop-work order issued shortly thereafter.