Decision 04-10-039 October 28, 2004
Before The Public Utilities Commission Of The State Of California
Order Instituting Investigation Into The Proposal Of Sound Energy Solutions To Construct And Operate A Liquefied Natural Gas Terminal At The Port of Long Beach |
I.04-04-024 |
OF ORDER INSTITUTING INVESTIGATION (I.) 04-04-024
I. INTRODUCTION
On April 27, 2004, the Commission issued I.04-04-024, "Order Instituting Investigation Into the Proposal of Sound Energy Solutions, Inc. ("SES") To Construct and Operate a Liquefied Natural Gas Terminal at the Port of Long Beach." ("OII"). The OII "institutes an investigation into the proposal of Sound Energy Solutions, Inc. (SES) to construct a liquefied natural gas (LNG) facility in Long Beach, California." (OII, p. 1). The OII ordered SES to file an application for a certificate of public convenience and necessity ("CPC&N") "if it intends to pursue construction of the project." The OII made four Findings of Fact, and concluded as a matter of law that "[i]f SES were to construct and operate the LNG terminal it describes in its pending application before FERC, it would become a public utility subject to the jurisdiction of this Commission." (OII, p. 10, Conclusion of Law 1). The OII further concluded that SES requires the authority of the Commission to site, construct or operate its proposed LNG terminal and must respond to Commission orders and information requests. (Id., Conclusions of Law 2 and 3). The Commission ordered SES to file an application for a CPC&N and that SES must receive
a CPC&N prior to commencing construction of its project. (Id. at 11, Ordering Paragraph 3.)
SES had initiated an informal "prefiling" process at the FERC in September 2003, Docket No. PF03-6. On October 30, 2003, the CPUC sent a letter to SES explaining that as the CPUC understood the project as SES was representing to the public, the project would require a CPC&N. On January 26, 2004, SES filed with the FERC an application, Docket No. CP04-58, pursuant to Section 3(a) of the Natural Gas Act ("NGA"), 15 U.S.C. § 717b, requesting authorization to site, construct and operate an LNG terminal located in the Port of Long Beach, and describing its proposed project in detail ("FERC Application"). In the FERC Application, SES stated that it had "complied in all material respects with the applicable laws and regulations of the State of California."1 On February 23, 2004, the Commission filed a protest at the FERC to SES's application and motion to intervene, arguing that the FERC failed to possess exclusive jurisdiction over the SES proposal due to the express language of Section 3 of the NGA and the absence of any interstate transportation of the imported LNG. On March 24, 2004, the FERC issued a Declaratory Order Asserting Exclusive Jurisdiction, 106 FERC ¶ 61,279 (2004), finding it had exclusive jurisdiction over the SES project despite the lack of interstate transportation and inviting the Commission to participate in FERC's proceeding, which it stated would address safety and security concerns. On April 23, 2004, the Commission filed a request for rehearing of FERC's Declaratory Order. On June 9, 2004, the FERC issued an Order Denying Requests for Rehearing, Denying Request for Stay, and Clarifying Prior Order, 107 FERC ¶ 61,263 (2004), reiterating its determination that the FERC possessed exclusive jurisdiction over the project, and further clarifying that no evidentiary hearings would be held to review the project, although technical workshops would be held in which parties such as the Commission could participate.
On May 27, 2004, SES filed an "Application of Sound Energy Solutions For Rehearing of Order Instituting Investigation and Request For Stay of the Proceeding," in I.04-04-024 (hereinafter, "Application"). On July 8, 2004, the Commission issued D.04-07-040, "Order Denying Request For Stay of Investigation 04-04-024." A prehearing conference was held in Long Beach on August 23, 2004.
The Application specifies twelve purported errors associated with issuance of the OII:
1. The OII violates SES's rights under the Constitution of the United States by commencing state proceedings based upon an assertion of authority that is preempted by federal law under the NGA as set forth in the FERC Declaratory Order.
2. The OII violates SES's right to due process under the Constitution of the United States and the California Constitution by denying SES an opportunity to respond to the OII prior to adoption of an order which requires SES to file an application for a CPC&N before beginning construction of an LNG import terminal and which further requires SES to respond to information requests by the CPUC and the CPUC staff.
3. The OII violates SES's rights to due process under the Constitution of the United States and the California Constitution by adopting an order asserting jurisdiction over SES in the complete absence of any factual record or any opportunity for SES to respond to the assertions of fact in the OII.
4. By instituting this investigation prior to the conclusion of administrative and appellate procedures required to contest FERC's outstanding Declaratory Order, the CPUC has not proceeded in the manner required by law under the NGA to seek relief from an order of the FERC related to LNG import facilities.
5. The OII is barred by res judicata and constitutes an impermissible collateral attach on FERC's declaratory order.
6. By opening this Investigation, making SES a respondent to this proceeding, ordering SES to file an application for a CPC&N prior to beginning construction on an LNG import terminal, and ordering SES to respond to information requests by the CPUC and its staff, the CPUC abused its discretion and acted prematurely and in excess of its jurisdiction because SES has not yet engaged in any activity which would qualify it as a public utility under California law.
7. By opening this Investigation, making SES a respondent to this proceeding, ordering SES to file an application for a CPC&N prior to beginning construction on an LNG import terminal, and ordering SES to respond to information requests by the CPUC and its staff, the CPUC abused its discretion and acted in excess of its jurisdiction because the proposed SES Import Terminal would not qualify as a public utility under California law.
8. The CPUC erred in finding that it has jurisdiction to regulate the siting, construction and operation of SES's Import Terminal pursuant to the U.S. Department of Transportation's ("DOT") Natural Gas Pipeline Safety Act ("NGPSA").
9. By opening this Investigation, making SES a respondent to this proceeding, ordering SES to file an application for a CPC&N prior to beginning construction on an LNG import terminal, and ordering SES to respond to information requests by the CPUC and its staff, the CPUC abused its discretion and acted in excess of its jurisdiction because the California Legislature has repealed CPUC jurisdiction over the siting of LNG terminals.
10. The CPUC erred in finding that because SES does not propose to conduct interstate transportation, the SES Import Terminal is not subject to FERC's jurisdiction.
11. By opening this Investigation, making SES a respondent to this proceeding, ordering SES to file an application for a CPC&N prior to beginning construction on an LNG import terminal, and ordering SES to respond to information requests by the CPUC and its staff, the CPUC abused its discretion and acted in excess of its jurisdiction because federal law grants exclusive jurisdiction to the FERC over LNG import terminal facilities - including those proposed by SES - and preempts the authority asserted by the CPUC.
12. The CPUC erred in finding that jurisdiction over SES can be established separately and apart from jurisdiction over SES's proposed LNG Import Terminal facilities.
Application, pp. 3-5.
SES further classifies the above errors into three categories: procedural errors in issuing the OII; misapplication of state law in concluding that SES is a "public utility" under CPUC jurisdiction; and failure to recognize the exclusive jurisdiction of the Federal Energy Regulatory Commission ("FERC") over the project.
With respect to procedural errors, the Application asserts that the OII violated SES's due process rights by denying it an opportunity to be heard and by failing to base its findings on any factual record. SES further claims the CPUC cannot judicially notice or rely upon SES's filings at the FERC. SES also asserts that the OII is an improper collateral attack on the FERC's Declaratory Order asserting jurisdiction over SES, and that the Commission is barred from issuing the OII due to res judicata.
SES further argues that under state law, it is not a "public utility" or a "natural gas company" and thus not subject to CPUC jurisdiction or required to field discovery requests. SES claims it has not yet engaged in activities which would qualify it as a public utility, and that its future activities only involve "foreign commerce." SES claims that the California Legislature, in repealing the previous LNG Terminal Act conferring exclusive state jurisdiction on the Commission over LNG facilities, repealed CPUC jurisdiction over LNG terminal siting. SES also posits that the OII errs in basing jurisdiction on review of safety and environmental issues or on market power concerns, which SES believes will be addressed by the FERC, or on CPUC "emergency powers."
Finally, SES generally asserts that FERC has jurisdiction over the LNG facilities, rather than the CPUC.
SES also expressly reserves its rights to seek relief in federal court for violations of federal law or the United States Constitution, pursuant to England v. Louisiana State Bd. of Medical Examiners (1984) 375 U.S. 411, 420-21. (Application, p. 1 fn. 1). This invocation of the "England reservation," as it is commonly known, means that the Commission is on notice that any Federal issues involved in the Commission's issuance of the OII and subsequent orders will be decided ultimately in Federal court.
We have carefully reviewed each and every argument raised by the application for rehearing and are of the opinion that good cause for rehearing has not been demonstrated. Accordingly, we deny the application for rehearing.
1 Exhibit C, FERC Application.
