6. CEQA Review

Because the Commission must decide whether or not to approve the PG&E and SPBPC applications, and because the applications may cause either direct or reasonably foreseeable indirect effects on the environment, the California Environmental Quality Act (CEQA) requires the Commission, acting as the lead agency, to consider the potential environmental impacts that could occur as the result of its decisions and to consider mitigation for any identified significant environmental impacts. Therefore, as required by CEQA, the Commission Staff issued a Draft Mitigated Negative Declaration (Draft MND) for this project. A total of eight comment letters were received from various agencies and organizations in response to the Draft MND. Staff's response to the substantive comments is contained in the Final MND issued March 11, 2005.

For purposes of CEQA, the "project" that is the subject of environmental review includes review of the proposed sale of PG&E's Pipeline Assets and Pump Station Assets to SPBPC. The project also includes SPBPC's proposal to own and operate the pipeline as a common carrier pipeline corporation, and to restrict the products that could be transported in the pipeline to crude oil, black oils, and refined petroleum products. The project includes construction of the 5,500-foot replacement pipeline segment, since such replacement is plainly a reasonably foreseeable consequence of the sale of the Pipeline Assets.

The substantive issues raised in the comment letters on the Draft MND, are addressed below.

It is anticipated that SCVHG will demolish the pump station and remediate the 44.2 acres of land on which the pump station is located to reuse the land for industrial, commercial and/or residential uses. The site is currently zoned by the City of Hercules for industrial land use. In order to use the land for anything other than industrial land uses, SCVHG would need, at minimum, approval by the City of Hercules of a General Plan amendment and rezoning, among other discretionary land use entitlements. When such entitlements are sought, environmental review under CEQA will be required by the City of Hercules as the lead agency. In addition, environmental remediation (under the regulatory jurisdiction of the Department of Toxic Substances Control and the San Francisco Regional Water Quality Control Board) would be needed to reuse the pump station land. Since the requirements for remediation depend on the intended use of the property, the nature and extent of remediation will not be known until the intended use is finally determined. No application or plans have been submitted to the City of Hercules for development of the pump station property, at this time.

Since details associated with future development of the pump station property are largely unknown at this point, Staff concludes that such development is properly excluded from the project analyzed in the MND. Not only is the future use of the pump station property uncertain (i.e., it could be used for residential or commercial uses or alternatively for industrial uses in accordance with the site's existing zoning), but the density and configuration of any future development of the pump station property - essential information needed in order to meaningfully analyze traffic impacts, air quality impacts, noise impacts, etc. - are also unknown at this point in the process. Thus, Staff concludes that this case is not analogous to the facts of Laurel Heights Improvement Association v. Regents of the University of California, 47 Cal.3e 376 (1988), cited by some commenters. The EIR at issue in Laurel Heights had only examined the impacts of the University's plan to devote a small portion of an office building located in a residential neighborhood to laboratory facilities, even though there was "credible and substantial evidence" in the record of the University's intent eventually to occupy the entire building with biomedical research laboratories. The court held that the EIR was inadequate because it failed to discuss the clearly anticipated future uses of the building and the environmental effects of those uses. Here, by contrast, there is no evidence in the record of either the particular land use likely to be proposed by SCVHG (e.g. residential, commercial, industrial, open space or some combination) or the likely configuration or density (e.g. single-family homes versus apartment buildings) of such possible future land use. In Laurel Heights, the University itself was preparing an EIR on its own readily foreseeable plans for the building. In the case of these Pump Station Assets, although SCVHG intends to develop the property, it would be meaningless for the Commission to speculate on SCVHG's eventual plan for the property.

The Final MND states that the potential environmental impacts associated with possible remediation and redevelopment of the pump station property would be fully analyzed in an environmental document prepared by the City of Hercules if and when such a proposal is submitted for City review. The City of Hercules would serve as the lead agency for such a project. In a June 2004 meeting with Staff, City indicated that in the event it was asked to review a proposal to change the land use of the pump station site or otherwise develop the site, it would likely prepare an EIR. We agree with Staff that the City is the proper entity to conduct such a review since it is the primary permitting agency for the land use entitlements needed for such a project. In addition, feasible mitigation measures and a reasonable range of alternatives will be explored for any significant environmental impacts in accordance with CEQA. Thus, we agree with Staff's conclusion that the impacts of the remediation and redevelopment should be addressed in detail at the appropriate time, and mitigated as appropriate, through the project-level environmental document to be prepared by the City of Hercules if and when an actual development plan is devised and proposed.

Commenters have also expressed concerns that the MND does not address the environmental impacts associated with potential tie-in points and pumping station(s). As stated in the Final MND, with the uncertainty surrounding development of the pump station property, the details associated with potential tie-in or pumping stations are largely unknown. SPBPC has not applied for permission to construct any such facilities. Instead, after the transfer of ownership of the pipeline to SPBPC, and after transfer of SPBPC to Shell, SPBPC intends to determine how to adapt and use the pipeline and which particular crude oils, black oils, and refined petroleum products would be transported through the pipeline. This process entails a comprehensive, comparative evaluation of the overall technical, economic, and commercial feasibility of use of the pipeline for transporting various potential products. The need for and location of facilities such as tie-in points and pumping station(s) will not be known until SPBPC has completed this detailed evaluation process and determined what specific products it intends to transport in the pipeline. Indeed, as pointed out by Applicants, it is possible that no pumping station facilities would be needed at all. For instance, the pipeline could be operated without the use of a pump station if it is connected to an existing pump station located at one of the refineries at either end of the pipeline.

The Final MND concludes that until SPBPC has completed its intended, comprehensive evaluation process and determined what specific products it intends to transport in the pipeline, the analysis of tie-in points and future pump station(s), if any, would be too speculative and meaningless to evaluate under CEQA. The facts of this case are analogous to the facts of National Parks and Conservative Association v. County of Riverside, , 42 Cal.App.4th 1505 (1996). In National Parks, the court rejected claims that an EIR for a regional solid waste landfill was inadequate for failing to analyze the impacts of solid waste transfer stations that would sort, recycle, and compact the solid waste before sending it to the landfill. The court reasoned that obtaining more information on the transfer stations would not be meaningful or possible since the location and operators of the facilities were unknown. (42 Cal.App.4th at 1519.) Thus, the EIR was not required to contain an analysis of such facilities.

Likewise, the reasoning of the National Parks case applies with equal force to the tie-in points and pumping station facilities at issue here, since whether such facilities are needed, where they would be located, and their size and other construction details, are unknown at this time. As such, we agree with Staff's conclusion that the MND is not required to speculate as to the impacts associated with such facilities. If the ultimate use of the pipeline requires the construction of such facilities, SPBPC would likely need discretionary approvals from at least the following agencies in order to construct tie-in points or pumping station(s): Contra Costa County, the Bay Area Air Quality Management District, and the State Fire Marshal.

Although the pipeline was originally constructed specifically for the purpose of transporting fuel oil, its Certificate of Public Convenience and Necessity (CPCN) authorizes transportation of "oil, petroleum, and products thereof" (Decision (D.) 84448).9 However, in the Second Amendment to the consolidated applications, dated September 9, 2004, SPBPC seeks authority to transport crude oil, black oils, and refined petroleum products. The Draft MND examines this proposal. Unless SPBPC seeks and gains approval (after undergoing environmental review) from the Commission and other relevant agencies, it could not use the pipeline to transport products other than crude oil, black oils, and refined petroleum products. Fuel oil and cutter stock, which were previously transported through the pipeline, fall under this definition, along with a wide range of other petroleum products.

The Final MND analyzes the potential impacts to the environment that would result from the sale of the Assets, the construction of the 5,500-foot replacement pipeline segment in Martinez, and operation of the pipeline by SPBPC. The MND, finds that approval of the consolidated applications would have no impact or less than significant effects in the following areas:

The MND indicates that approval of the applications would result in potentially significant impacts in the areas of:

The Final MND concludes that each of the identified potentially significant impacts can be mitigated to avoid the impact or reduce it to a less than significant level. The mitigation measures presented in the Final MND have been agreed to by PG&E and SPBPC. A Mitigation Monitoring and Reporting Plan included in the Final MND as Appendix C, specifies how all mitigation measures will be implemented.

Upon Commission approval of SPBPC's application for authority to own and operate the pipeline, SPBPC would be responsible for implementation of any mitigation governing both construction of the 5,500-foot replacement segment and future operation of the pipeline. Though other state and local agencies10 would have permit and approval authority over the construction of the 5,500-foot replacement segment, the Commission would continue to act as the lead agency for monitoring compliance with all mitigation measures required by the Final MND. All approvals and permits obtained by SPBPC would be submitted to the Commission for mitigation compliance prior to commencing the activity for which the permits and approvals were obtained.

9 The existing CPCN will not need to be transferred to SPBPC. Under § 1001, companies whose operations are solely related to the transport of oil (i.e., oil pipeline companies) are not required to obtain a CPCN, but must obtain common carrier status from the Commission prior to commencing operations. 10 Including the East Bay Regional Park District, the City of Martinez during construction, and the State Fire Marshal when the entire pipeline is ready to be placed in service.

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