6. Environmental Issues
Several comments raise environmental issues regarding LNG supply contracts. Woodside suggests that the comparison of LNG and domestic natural gas supply options should take account of socio-environmental (and political) issues such as greenhouse gas, air quality, water quality, environmental justice and regulatory jurisdiction. In a similar vein, CE Council recommends that the Commission establish a "sliding scale adder" to reflect the greenhouse gas (GHG) emissions associated with all power and natural gas contracts. SCAQMD recommends that we require contracts between LNG suppliers and the utilities to include monitoring and testing provisions to ensure that LNG will meet the 1385 Wobbe standard mandated in D.06-09-039, and indemnification provisions so that the costs of noncompliance with regulatory emission requirements resulting from the use of LNG will fall on suppliers. SCAQMD also urges the Commission to conduct a California Environmental Quality Act (CEQA) analysis of the use of LNG, which it maintains is legally required.
These issues are beyond the scope of the proceeding. The focus of this proceeding is the ability of long-term LNG supply contracts to guarantee reliable gas supply at a reasonable cost, and the process under which the utilities should procure and seek cost recovery for such supply. This proceeding does not undertake to establish contracting requirements related to environmental issues either with respect to LNG supply in particular or, having determined that LNG supply should be treated the same as domestic gas supply for procurement purposes, with respect to natural gas supply generally.
With regard to SCAQMD's assertion that a CEQA analysis is legally required in this rulemaking, SCAQMD does not make any specific reference to the law and we do not find any law that leads us to agree with its conclusion. Generally, environmental review pursuant to CEQA is triggered when a public agency exercises its discretionary power to carry out or approve a project that may have a direct or a reasonably foreseeable indirect, physical impact on the environment. (Pub. Resources Code § 21065, CEQA Guidelines § 15002.) The utilities' potential procurement of LNG supply is not a "project" under CEQA as it is not an activity directly under taken by a public agency; it is not supported by financial assistance from a public agency; and it does not require a permit, license or certificate from a public agency. (Pub. Resource Code § 21065, CEQA Guidelines § 15378.) Our decision today does not commit us to any course of action, narrow the field of options and alternatives available, or dictate how any funds are to be spent. (Kaufman & Broad-South Bay Inc. v. Morgan Hill Unified School District (1992) 9 Cal.App. 4th 464, 476.) For all these reasons, we conclude that an environment analysis under CEQA is not required in this proceeding.
