ALJ/MCK/eap DRAFT Agenda ID # 5355

Ratesetting

March 2, 2006 Item 23

Decision

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application by Lodi Gas Storage, L.L.C. (U-912-G) for a Certificate of Public Convenience and Necessity for Construction and Operation of Gas Storage Facilities.

Application 05-07-018 (Filed July 25, 2005)

DECISION GRANTING CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY TO CONSTRUCT AND OPERATE THE KIRBY HILLS NATURAL GAS STORAGE FACILITY

I. Summary

This decision grants a certificate of public convenience and necessity (CPCN) to applicant Lodi Gas Storage, L.L.C. (LGS) to construct and operate a gas storage facility in Solano County, California that will be known as the Kirby Hills Natural Gas Storage Facility (Kirby Hills Facility or Facility). In order to build the Facility, LGS will be reconditioning and enhancing an old gas production reservoir that was first discovered by the Shell Oil Corporation (Shell) in 1945 then used for gas storage during the 1970s and 1980s.

The proposed Facility will have three principal components. The first is a natural gas storage and withdrawal field, which includes a compressor/dehydration station and injection/withdrawal wells. This area is located within the Kirby Hills Gas Field and includes several pads for producing gas wells.

The second component of the Facility will be a 5.9-mile pipeline running from the compressor/dehydration station in the gas storage field area to a remote metering station and interconnection site, where the Facility will interconnect with Pacific Gas and Electric Company's (PG&E) Line 400.

The third component is the remote monitoring station and interconnection site near PG&E's Line 400. This third component is located on a 0.75 acre site on which LGS now holds a long-term lease.

As part of its application, LGS has requested that it be authorized to charge market-based prices for the storage and hub services that will be supplied by the Facility. Because such authority would be consistent with the pricing authority for LGS's existing facilities near Lodi, and also with the policies we have followed since Decision (D.) 93-02-013 to promote competitive gas storage facilities, we will grant the market-based pricing authority that LGS requests.

As part of its application, LGS has also requested that the Commission find, pursuant to the California Environmental Quality Act (CEQA), that the Facility either (1) has no significant environmental impacts, or (2) that any potentially significant environmental impacts can be mitigated to less-than-significant levels through the mitigation and monitoring measures that LGS has proposed. As part of our decision today, we accept and approve the Final Initial Study/Mitigated Negative Declaration (Final IS/MND) our staff has prepared in connection with the Facility. The Final IS/MND concludes that there are several potentially significant environmental effects associated with the Facility, but that these effects can be reduced to less-than-significant levels through implementation of the mitigation measures set forth in the Final IS/MND. As a condition of granting the authority sought in the application, we will require LGS to implement each of the mitigation measures required by the Final IS/MND, and to abide by the Mitigation Monitoring Plan set forth in Section C thereof.