7. Discussion
Underlying much of the testimony in this case is the fact (of which we take official notice) that the Commission in the past 15 years has made extraordinary strides in developing competition in the telecommunications markets. The Commission has opened long distance markets for both resellers and facilities-based carriers. More recently, it has opened local exchange markets to competition. Competition in these markets is intended to promote technological innovation, reduce prices, and provide customer choice.
In pursuing these objectives, the Commission has sought ways to ease barriers to entry brought about by regulatory procedures. At the same time, the Commission has faced the challenge of balancing regulatory oversight while dealing with the addition of hundreds of carriers into the marketplace.
As the testimony here shows, the Commission has established a simplified registration process intended to ease market entry for new long distance carriers that intend to compete through existing facilities. For a time, in a process now discontinued, the Commission permitted entrants in the local exchange market to complete a short-form environmental disclosure and begin operations pursuant to a blanket CEQA authority issued in quarterly batches.
Not surprisingly, this expansion of the telecommunications markets has strained the regulatory process. The Commission has been compelled to reevaluate its requirements under CEQA to ensure sound environmental practices by regulated utilities. The Commission for the past two years has begun taking a more active role in environmental oversight. On at least five occasions in recent months, we have ordered carriers to halt construction of telecommunications facilities following complaints from other government agencies and members of the public about the carriers' compliance with CEQA. In December 1999, we issued D.99-12-048 and D.99-12-050 to discontinue the practice of issuing authority to new CLCs in batches. We now conduct environmental analysis of each application, and we require carriers to file again before starting new construction.
In February 2000, we opened a new rulemaking (R.00-02-003) to explore all of our CEQA practices in the telecommunications field. We called for comments on whether local exchange carriers with pre-existing authority should continue to be exempt from CEQA review by this Commission. We sought guidance on whether local governments have sufficient resources to direct CEQA compliance in place of Commission review. We invited comments on the Commission's existing practice for authorizing new long distance carriers in a manner intended to protect California's environment.
With this said, we turn to the case at hand, a case that exposes some of the weaknesses in our CEQA review process that existed in 1998. In weighing the evidence, we look to CSD to show by a preponderance of the evidence that PFL has violated Commission rules, and that sanctions are merited. (See, e.g., D.98-10-058 ("Right-of-Way Decision"), Conclusion of Law 73; Re Facilities-Based Cellular Carriers (1994), D.94-11-018, 57 CPUC2d 176.)
As CSD correctly reminds us, it is this Commission and other government agencies that are bound by the requirements of the State's Environmental Quality Act. PFL therefore does not stand accused of violating CEQA. Instead, PFL is alleged to have violated rules established by this Commission in order that the Commission can carry out its CEQA responsibilities.
7.1 Did PFL Wrongfully File for Operating Authority Through Registration?
Rule 1 of the Rules of Practice and Procedure establishes a generic requirement that those who transact business with the Commission must not mislead the Commission or its staff by an artifice or false statement of fact or law. D.97-06-107 sets forth the registration process for NDIECs. CSD alleges that PFL violated Rule 1, Rule 18 (governing the procedure for filing applications), and the requirements of D.97-06-107. CSD alleges that PFL misled the Commission by using the simplified registration process instead of an application, thereby implying that PFL intended to conduct its long distance service without constructing new facilities.
The evidence does not show that PFL attempted to mislead the Commission in its filing. The company through its counsel described the fiber optic conduit project to the Commission representative responsible for NDIEC registrations. PFL was told that the Commission did not at that time do CEQA review for NDIEC entrants, the great majority of which did not contemplate construction. PFL was advised to print out the two-page registration form from the Commission's web site, read the instructions, and file the form if it sought to file as an NDIEC. PFL representatives sought further guidance and again were told that the Commission's procedure required registration for carriers seeking authority to operate as NDIECs.
CSD alleges that regardless of what PFL was told by Commission staff, the instructions on the simplified form, as well as the findings in D.97-06-107, state that the form could not be used by facilities-based NDIECs. The evidence shows, however, that the instructions did not conform at that time to the practice followed by the Commission. All NDIECs were expected to file through registration. A Commission CEQA representative testified that it was not clear in 1998 that the Commission would serve as the lead agency for CEQA compliance for NDIEC entrants or whether other government agencies would fill that role.
Moreover, the particular instruction relied on by CSD - Rule 4 of the registration form - appears to be in error in referring to only one Class A exemption (Rule 17.1(h)(1)(A)(1)), instead of all nine exemptions contained in Rule 17.1(h)(1)(A), as would appear to be the intent.
In any event, PFL in filing its registration identified itself as a "facilities-based" NDIEC, thus negating the suggestion that it was seeking to hide its intention to operate with its own equipment and installations.
The Commission's NDIEC witness testified at hearing that, in his judgment, the Commission should balance PFL's actions with the Commission's uncertainty regarding CEQA compliance for NDIECs. Asked whether he thought it would be fair for PFL to be sanctioned in this case, he replied:
"A. I would recommend the general policy - I hope this answers your question - that the general policy of this Commission should be the following: We and utilities have been screwing up for years. We're going to change our policy as of today and tell all the utilities that from now on this is what they must do and what we will do, concerning our responsibilities in CEQA as well as the utilities' responsibilities in CEQA. Prior to that statement, I think the Commission should not go back retroactively and say, `Well, you should have known that we didn't mean what we did, but you did mean what you did.'
"Q. Okay. And if that policy were applied by the Commission in this case, wouldn't that mean that any violations concerning CEQA would be fully mitigated?
"A. Yes." (Transcript at 284; McIlvain.)
Rule 1 violations require purposeful intent, recklessness, or gross negligence in regard to communications with the Commission. (In re Facilities-Based Carriers, supra, D.94-11-018, at 82.) That showing has not been made on this record. We further find that any violation by PFL of Rule 4 of the registration form and the identical requirement in D.97-06-107 was mitigated by the company's reliance on the existing Commission practice and the unambiguous instructions of Commission staff.
7.2 Did PFL Wrongfully Begin Construction?
The evidence shows that PFL began construction of its fiber optic conduit project on December 2, 1998, at a time when it knew or should have known that Commission approval under CEQA was required and had not yet been obtained. The testimony of PFL's environmental experts shows that they knew that the Commission was the lead agency for CEQA purposes, and that CEQA review was necessary. Indeed, prior to construction, they had begun compiling the reports that their experience told them would be required as part of a Commission-sponsored CEQA analysis. PFL had been told by the Department of Fish and Game and other government agencies that CEQA clearance was necessary. The increased urgency of PFL's lawyers in seeking Commission action on the environmental issue demonstrates the importance that the company placed on obtaining CEQA review.
We give little credence to the company's defense that it notified the Commission's John Boccio that it was about to begin construction unless he told them they could not do so. First, the request smacks of an ultimatum, and Commission staff members resist ultimatums. Second, it is undisputed that both Boccio and his supervisor, Andrew Barnsdale, had stated that PFL should not proceed without CEQA clearance - they just weren't sure how that clearance would be accomplished. Finally, the fact that PFL through its attorney asked whether the Commission would stop PFL from constructing was itself an admission that Commission authority under CEQA was required. Indeed, the company in its brief states that had the Commission told PFL not to proceed at that point, the company would not have done so. (PFL Reply Brief, at 1.) As Barnsdale later testified, PFL's decision to proceed on December 2, 1998, was made of its own volition and at its own risk.
Accordingly, we agree with CSD that the company's decision to begin work prior to obtaining CEQA clearance from the Commission was a violation of Rule 17.1, which contemplates advance preparation, filing and approval of environmental documents for projects "for which Commission approval is required by law." (Rule 17.1(c).) It follows that we also find a violation of Pub. Util. Code § 702, which requires public utilities to comply with the rules of the Commission.
7.3 Mitigation
We turn next to the more difficult question of whether PFL's violation was mitigated by the facts and circumstances of this case and, if so, to what extent mitigation should apply.
The record shows that PFL in 1998 was the first carrier with only NDIEC authority to seek CEQA approval for contemplated construction. It is equally clear that the Commission staff responsible for CEQA review did not know what to do with that request. Staff was aware that at least some carriers with both NDIEC and CLC authority obtained CEQA review under the blanket mitigated negative declaration procedure available only to carriers seeking CLC authority. Staff did not know whether that or a similar procedure was available for a carrier holding only NDIEC authority. Staff also was aware, as was PFL, that carriers such as Pacific Bell, Sprint and AT&T were permitted to do similar trenching and conduit projects without CEQA approval under various claimed exemptions from the Commission process.
Weeks of meetings and telephone conversations between PFL and the Commission's CEQA staff followed. Meanwhile, PFL retained qualified outside environmental consultants, who reviewed the proposed construction and directed procedures to protect environmental resources. PFL worked closely and cooperatively with the Commission's CEQA staff. The Commission staff made calls to other agencies to explain that the company and the Commission were working toward a resolution. PFL formed a reasonable belief, supported by staff, that PFL's CEQA status would be corrected with a paperwork or administrative solution.
By late November 1998, PFL had obtained all local approvals and permits, had put out bids and had hired crews to begin the work in Yolo County. It had obtained from Yolo County a notice of exemption from CEQA requirements to permit PFL to trench and lay conduit for a county 911 system beside the PFL conduit. The Commission's CEQA staff had called CalTrans to help clear the way for PFL trenching in an adjoining county. Initial work for PFL would take place within roadway, rail and other rights-of-way, where CEQA approval often is routinely granted or is not required.
After construction began, PFL continued to work with the Commission's CEQA staff, furnishing them with the environmental reports issued by PFL's consultants. The CEQA staff gave implicit approval to the environmental steps that PFL had put in place for its construction.
We believe that the mitigating circumstances described above should be weighed against PFL's violations in starting construction without Commission-approved CEQA review. The Commission at all relevant times admittedly had no procedure in place for conducting a CEQA review for PFL. Based on its conversations with CEQA staff, PFL reasonably could believe that an administrative approval was being fashioned. PFL had retained environmental experts to conduct the kind of proponent's review that ultimately would be required by the Commission.
We note, finally, that the Commission's stop-work order in July 1999 shut down PFL's project for six months, with attendant financial loss to the company. The stop-work order served notice on all telecommunications carriers that failure to comply with the Commission's CEQA requirements could result in an order to stop work, or in other sanctions.
We conclude therefore, after review of the record as a whole, that PFL's cooperation with Commission staff, its efforts to comply with the substantive requirements of CEQA, and the Commission's own uncertainty in 1998 in dealing with the CEQA requirements for NDIEC entrants, mitigate against assessment of any further sanctions by this Commission against the company. Our order today so holds.
