3. Parties' Positions

This section briefly summarizes the positions of the parties in this proceeding.

GRS and PG&E state that the Proposed Project is consistent with California's gas storage policy, and qualifies for application of the "let the market decide" policy established in D.93-02-013. According to GRS and PG&E, the Proposed Project will provide another competitive natural gas storage option in California, reducing market concentration and minimizing the potential for the exercise of market power by any single market participant.

PG&E states that its share of the Proposed Project will be integrated with the operation of PG&E's existing gas storage facilities, and PG&E's existing market storage rates (rates that are negotiable within certain price caps) will apply to services provided using PG&E's share of the Proposed Project.

GRS states that it currently has no customers in the California storage market, and that it will compete with incumbent and competitive gas storage providers, including PG&E. GRS states that its shareholders will bear all of the risks for the success of its share of the Proposed Project.

Will Gill & Sons asserts ownership of 3,600 acres of the Gas Field area and rights to use the space under that property, and states that GRS and PG&E do not have an agreement to use the Will Gill & Sons property. Will Gill & Sons' protest requests that the Commission reject or suspend the Applications until GRS and PG&E acquire sufficient ownership interests in the underground reservoirs.

Armstrong's protests also request that the Commission reject or suspend the Applications until GRS and PG&E acquire sufficient ownership interests in the underground reservoirs. Armstrong further contends that § 785 requires the Commission, as a first priority, to encourage increased gas production, and that the Proposed Project will frustrate this policy.

Armstrong states that it currently leases mineral rights to most of the Gas Field from Will Gill & Sons, and is currently extracting natural gas from the Kreyenhagen Formation and from an area situated between the Domengine and the Starkey Formations.18 Armstrong asserts that there are additional natural gas deposits above, within, between and beneath the formations that GRS and PG&E intend to use as storage reservoirs, and that the Proposed Project could interfere with its existing gas producing operations and foreclose the future production of up to 16 billion cubic feet (bcf) of natural gas deposits in the Proposed Project area.

DRA does not object to granting CPCNs to GRS and PG&E or a PTC to PG&E. However, DRA recommends that GRS and PG&E each be required to annually report to the Commission (1) the capacity of the facilities (total inventory, injection and withdrawal rights); (2) average monthly inventory in storage, injections, and withdrawals; (3) daily operating records; (4) annual firm capacity under contract; (5) annual interruptible capacity sold; and (6) annual safety report describing all safety-related incidents.

DRA also requests that any exemption from the requirements of § 818 and § 851 in connection with GRS' financing of the development of the Proposed Project be limited to the financing of the proposed facility and not to other transactions.

LGS and WGS are concerned that the Proposed Project may allow PG&E to give undue preference to GRS in terms of interconnection, curtailments, and other arrangements. LGS and WGS request that parties have an opportunity to review and comment on the Applicants' Operating Balancing Agreement (OBA) and the OA (Operator Agreement). LGS requests that the Commission's decision explicitly require PG&E to take all steps necessary to avoid any undue preference.

In addition, LGS is concerned that PG&E has the potential for exercising undue control of the storage market through its ownership interest in the Proposed Project, and the impact this could have on competition in California's natural gas storage market. LGS requests that PG&E be required to obtain prior Commission approval before enlarging its interest in the Proposed Project.

LGS also requests that, if the Commission does not require PG&E to provide full cost information as part of this proceeding, the Commission should require PG&E to seek Commission authorization for any cost recovery in core rates, and impose on PG&E the burden of justifying the costs of the Proposed Project as prudent and reasonable.

LGS further requests that GRS and PG&E be required to submit monthly, semi-annual, and annual reports containing the information requested by DRA and information concerning changes in project ownership by PG&E and its affiliates.

Finally, LGS requests that the Commission require GRS to comply with conditions imposed on other natural gas storage providers, and, in particular, the conditions imposed on LGS by D.08-01-018.19

Meyers is concerned about the possible impacts of the Proposed Project on endangered and other special status species, and other natural resources on its property. Meyers states that the Proposed Project's pipeline route runs along the southern portion of property owned by Meyers that contains habitat for endangered and special status species, and that the property is identified for protection by the United States Fish and Wildlife Service (USFWS).

Meyers asserts that its property is one of the only native habitats remaining in the San Joaquin Valley portion of Fresno County, and connects the Alkali Sink Ecological Reserve and Mendota Wildlife Area to the San Joaquin River and the Chowchilla Canal. Meyers requests that the Proposed Project be implemented in a way that does not interfere with the development or approval of the property for use as a conservation bank.

On September 18, 2008, Applicants supplemented the PEA in response to Meyer's concerns, and requested that the Commission evaluate an alternative pipeline route (the San Mateo Avenue route). Applicants' supplemental PEA states that the San Mateo Avenue pipeline route avoids any conflict with the Meyer's property conservation bank and avoids or mitigates other impacts to biological resources.

18 The Applications also acknowledge that the Gas Field has been and continues to be used for natural gas production. (PG&E Application, at 8; GRS Application, at 8.)

19 D.08-01-018 approved a settlement related to the transfer of control of LGS and established conditions addressing capital requirements, maintenance of and access to books and records, reporting on acquisitions of electric and natural gas investments, information sharing, and control over multiple independent gas storage providers.

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