2. Background and Related Procedural History
Senate Bill (SB) 1368 (Stats. 2006, ch. 598), enacted in September 2006, directs the Commission, no later than February 1, 2007, to establish an interim greenhouse gas emission performance standard (EPS) and to adopt rules to enforce this standard. By Decision (D.) 07-01-039, the Commission timely adopted Interim Rules for the Greenhouse Gas Emissions Performance Standard (Interim EPS Rules), which govern carbon dioxide (CO2) emissions from most baseload generation facilities that provide electric power to California ratepayers.1
In summary, with the sole exception of certain newer, combined cycle natural gas-fueled powerplants that SB 1368 expressly deems to be EPS compliant, SB 1368 prohibits the Commission from approving, and any load serving entity (LSE) from making, a long-term financial investment in a baseload powerplant that does not meets the EPS. In developing the Interim EPS Rules, the Commission was obliged to closely examine the scope of what D.07-01-039 terms covered procurements and, as relevant here, whether covered procurements that utilize CO2 sequestration projects should merit a blanket exemption from the EPS. D.07-01-039 determines that a blanket exemption is not needed since "SB 1368 provides the flexibility to both encourage new technologies while meeting the EPS."2 Moreover, D.07-01-039 finds that in calculating the net emissions for CO2 sequestration projects, CO2 that is sequestered through injection in geological formations should not be counted.
D.07-01-039 requires that LSEs request, by application, a Commission finding of EPS compliance for all such CO2 sequestration projects. The decision describes the contents of the plan in text at pages 93-94 and page 175, in Conclusion of Law 47, and in Ordering Paragraphs 3(c)ii and 6. We quote Conclusion of Law 47 here, as it contains the most comprehensive and contextual description:
Because of the unique nature of CO2 geological injection sequestration projects, an LSE entering into an EPS covered procurement utilizing such projects should request Commission
pre-approval by application. In order to ensure that the purposes of SB 1368 are served, the LSE should be required to (1) provide documentation that the project has a reasonable and economically and technically feasible plan that will result in the permanent sequestration of CO2 once the injection project is operational and
(2) present projections (and documentation of those projections) of net emissions over the life of the powerplant, and (3) provide documentation that the CO2 injection project complies with applicable laws and regulations.3
On November 30, 2009, The Natural Resources Defense Council, the Environmental Defense Fund, Green Power Institute, Union of Concerned Scientists, and The Utility Reform Network (collectively, NRDC et al.), filed this petition seeking modification of D.07-01-039. At the request of Southern California Public Power Authority (SCPPA), the assigned Administrative Law Judge (ALJ) extended the time for responses to January 15, 2010. The following
parties filed timely responses: SCPPA, the Division of Ratepayer Advocates (DRA), and the Southern California Edison Company (SCE). Hydrogen Energy California, LLC (HECA) requested party status in order to file a response and the ALJ granted the request. HECA is the sponsor of a proposed, integrated gasification combined cycle project to be located in Kern County, California and would produce hydrogen for low-carbon power generation with carbon capture for use in enhanced oil recovery and CO2 sequestration. The ALJ also granted the request of NRDC et al. to file a reply on January 25, 2010.
1 See Interim Opinion on Phase 1 Issues: Greenhouse Gas Emissions Performance Standard (2007) D.07-01-039. The Adopted Interim Rules are Attachment 7 to the decision.
2 D.07-01-039 at 93.
3 D.07-01-039, Conclusion of Law 47.
